The Saudi Stock Exchange (Tadawul) has grown by leaps and bounds in a relatively short period from being an exchange serving local investors’ needs with restricted capital markets products offerings and limited capacity to raise funds to becoming the tenth largest exchange globally in market capitalization at SAR11 trillion in June 2023. This achievement has come on the back of several reforms carried out in recent years by Tadawul and the Capital Market Authority (CMA) as the Kingdom seeks to diversify its economy in line with Vision 2030 initiatives. Tadawul’s efforts to get the exchange recognized internationally and offer the IPO candidates a larger investor base resulted in the foreign investors’ ownership in the capital market to growing from SAR198 billion in 2019 to SAR376 billion in June 2023.

Despite the high level of uncertainty prevailing in the global economy – driven by high inflation and interest rates, supply chain challenges and geopolitical unrest – the Kingdom’s capital markets were resilient and received extraordinary funding of SAR50.8 billion in 2022 on Tadawul through IPOs and rights issues. Other than the reforms and international recognition, the increased capital markets activity is primarily on account of higher liquidity, investors’ confidence and the government's push for the privatization of the Public Investment Fund (PIF) assets and other government entities. The overall growth in the Kingdom’s economy, including the expansion of the capital markets, has been financed by favorable trends in oil prices.

Compared to the leapfrogging results of the 2022 Tadawul listings, the IPO drive in Saudi Arabia has moderated in 2023, though the pipeline in the second half of 2023 and beyond remains firm with 25+ companies currently working on their IPO submissions. Alongside giga-projects such as NEOM, whose IPO is expected in 2024, Ades International Holding Company, a PIF-backed oil & gas drilling company, is anticipated to be Saudi Arabia’s biggest IPO of 2023 with SAR3.75 billion funds expected to be raised.

This publication aims to provide an overview of the capital markets in the Kingdom and hopes to provide key considerations for any company contemplating an IPO journey.