Tadawul launches Nomu - Parallel Market
In a bid to provide additional source of funding for issuers to access capital, increase diversification and deepen the capital market, Tadawul has launched Nomu, a parallel equity market with lighter listing requirements that serves as an alternative platform for companies to go public.
Following the Capital Market Authority’s (CMA) announcement of issuing the Parallel Market Listing Rules in December 2016, Tadawul launched the Nomu - Parallel Market in February 2017. Nomu is a new market with lighter requirements, with the possibility for companies to transition to the Main Market after a new filing process with the CMA.
According to industry reports, seven companies have already received the CMA’s approval to list on the new bourse.
The launch of Nomu - Parallel Market is a step towards fulfilling Tadawul’s plans to further develop the capital market. It is also in alignment with the objectives of the 2030 Vision which stress the importance of developing a more advanced capital market open to the world, allowing greater funding opportunities and stimulating economic growth. This will in turn generate more diverse investment opportunities and instruments for all capital market participants.
Nomu - Parallel Market is expected to open new investment opportunities to all types of companies—including SMEs—which play a key role in leveraging the national economy and accelerating development.
Potentially growing companies are expected to benefit from listing in the capital market with less listing requirements compared to the Main Market in terms of market value, number of shareholders, and offered shares’ percentages.
Nomu - Parallel Market is also aimed to enhance business growth for listed companies through diversifying financial resources of expansion plans, applying governance and disclosure standards, and adopting best management practices. Ultimately, this will uplift the company’s profile, increase brand equity and market value, and raise public interest in its offerings.
Proposing a less stringent application for issuers, the admission requirements allows the offering Qualified Investors to take place first, then listing is conducted. According to Tadawul, the issuer must be a Saudi joint stock company or a joint stock company which the majority of its capital is owned by citizens of a member state of the Cooperation Council for the Arab States of the Gulf and enjoys a nationality of one of them.
The issuer must have a minimum market cap of SAR 10 million, with a one year minimum of operational and financial performance. A financial advisor is mandatory for the listing company, however a legal advisor is optional. The company must be able to produce annual audited financial statements as well as quarterly reviewed financial statements, in addition to a disclosure of material information. No profitability track record is required for a listing on Nomu.
According to the listing requirements, at least 20 per cent of shares should be owned by the qualified public, with no single investor owning more than five per cent. There is a lock up period for 100 per cent of pre-offering investor shares for one year. If the expected aggregate market value for all shares to be listed exceeds SAR 40 million, at least 50 public shareholders are required. If the expected aggregate market value for all shares to be listed is less than SAR 40 million, at least 35 public shareholders are required.
The investment in this market is restricted to Qualified Investors, therefore authorised Persons (APs) must determine the eligibility of investors as stipulated under the Nomu - Parallel Market rules. Retail investors (who are not classified as Qualified Investors) can access Nomu through investment funds with diversified investment strategies, which mitigate any risks of direct investment on individual investors.
The continuous obligations for a company on the Nomu - Parallel Market is lighter (in regards to time permissible to disclose) than those on the Main Market. Disclosure of quarterly financial statements within 45 calendar days from the end of the period and year-end financial statements within 90 calendar days from the end of the period.
Daily fluctuation limits for stocks on the Main Market is ±10 per cent, while the Nomu - Parallel Market allows for ±20 per cent.
The transition to Tadawul’s Main Market requires a company to be listed on Nomu - Parallel Market for at least two years and meet the Main Market requirements.
The brokerage firms for Nomu are currently NCB Capital and Al Rajhi Capital.