The Saudi Exchange (Tadawul) Parallel Market (Nomu) saw extraordinary growth in new initial public offerings (IPOs) during the last year with 32 new businesses being welcomed to the market. This surge in IPOs in Saudi Arabia is indicative of the country’s efforts to diversify its economy and reduce its dependence on oil revenue. Let’s take a closer look at this development and what it means for investors.
Nomu – Parallel Market Primary Goals and Objectives
The Saudi Parallel Market Nomu was established with the aim of achieving two main objectives. An initial priority is to give companies an additional avenue to obtain capital funding. The Nomu offers a simpler and more cost-effective listing process, making it an attractive option for smaller companies that may not meet the stringent listing requirements of the main Tadawul stock exchange. The second objective is to increase the diversification and deepening of the Saudi capital market. By providing a platform for small and medium-sized companies to list their shares and raise capital through the sale of stocks, Nomu aims to create a more diversified and sustainable economy. The surge in IPOs on the Nomu in 2023 is indicative of the success of these objectives and a positive sign for the future of the Saudi capital market.
Why are Saudi IPOs on the rise?
“Saudi IPOs are top global performers and the market is ripe with potential, said financial experts at the Saudi Capital Market Forum in Riyadh.”
Saudi Arabia has been working to diversify its economy away from its reliance on oil revenue. The country’s Vision 2030 plan aims to create a more diversified and sustainable economy by investing in non-oil sectors such as tourism, technology, and healthcare. As a result, the government has been encouraging more companies to list on the stock exchange as a way to raise capital and expand their businesses.
What does this mean for investors? The increase in IPOs on the Nomu means that there are more investment opportunities for investors looking to invest in Saudi Arabia. The Nomu offers an alternative to the main Tadawul exchange, which is dominated by large companies such as Saudi Aramco. By investing in smaller companies on the Nomu, investors can diversify their portfolios and potentially see higher returns.
However, investing in IPOs can be risky, especially for smaller companies with less of a track record. It’s important for investors to do their research and carefully consider the risks before investing in any IPO. Additionally, investors should consider working with a financial advisor who can help them navigate the complexities of the stock market.
Nomu-Parallel Market Applicable Investors?
The Nomu-Parallel Market is only available for Qualified Investors, and the eligibility of potential investors must be determined by the Capital Market Institution.
To be considered a Qualified Investor, several criteria must be met. Capital Market Institutions can invest in the Nomu-Parallel Market for their own benefit, while their clients can invest if the institution has been appointed as an investment manager. In addition, the Government of the Kingdom, global/international authorities recognized by the CMA or the Exchange, and other stock exchanges recognized by the CMA or Edaa may also invest in the Nomu-Parallel Market.
Government-owned companies and investment funds established in a member state of the Cooperation Council for the Arab States of the Gulf are also eligible to invest, as are non-resident foreigners, qualified foreign financial institutions, and other legal persons allowed to open an investment accounts in the Kingdom and at Edaa. Natural persons can also invest if they meet certain criteria, such as having achieved transactions in capital markets of at least SAR 40 million or holding net assets of at least SAR 5 million. It is important to thoroughly understand the requirements of Qualified Investors prior to considering investing in the Nomu-Parallel Market.