Asharqia Chamber reviews financial and legal requirements for listing companies in Growth Market
Asharqia Chamber, represented by the Investment and Studies Department, organized a workshop today, Tuesday, November 5, 2024, entitled "Financial and Legal Requirements for Listing Companies in the Growth Market", in which specialists spoke about the most important features of listing and the initial public offering process in "Growth". The workshop explained some of the advantages, as listing provides companies with the ability to raise capital by offering new shares or selling existing shares to a large number of new investors. It also provides more flexible offering requirements compared to the main market, contributes to enhancing the company's brand position in the market, and grants early investors the opportunity to exit flexibly and effectively, and enables the possibility of establishing strategic partnerships, which enhances its growth prospects, and priority in government tenders and purchases, stressing that "Tadawul" is the largest market in the Middle East and North Africa region, and is among the ten largest financial markets with a market value of $ 3 trillion. The workshop stressed that since its establishment in 2017, Nomu has witnessed a total of 79 initial public offerings (excluding direct listings), with an average offering ratio of 20%, an average value of 40 million Saudi riyals, and an average coverage ratio of 319%.
The workshop also reviewed the main challenges facing companies seeking to go public in the Nomu market, including: governance and transparency, as family businesses may face difficulty in adapting to governance standards in the parallel market, including transparency, finding independent board representatives, and disclosure requirements, which may be considered new to the strategy followed in making decisions in family businesses, in addition to valuation expectations, as determining the market value is considered a complex matter for family businesses, as additional discounts may be applied due to potential risks associated with the governance of family businesses, which may lead to disputes regarding determining the market value. She highlighted the issue of identifying candidates for leadership positions, as the transfer of leadership positions to competencies from outside the family may cause conflicts if the family's interests conflict with market expectations for the company's strategy, as well as changing the company's culture, which may require the transformation into a public company, changing the company's culture from a private environment centered around the family to a more profit-oriented and institutional approach, which may affect employee loyalty and the usual family culture of these companies. She also pointed to challenges related to compliance with regulations and investor relations, and concerns about liquidity and control. For his part, the head of the Chamber's Finance Committee, Zaid Al-Yaish, said that listing companies on the parallel market "Nomu" is at the heart of good governance, as it establishes the rules of transparency and disclosure, increases opportunities for obtaining funding sources, and expands brands at a rapid pace; This helps increase the volume of business production and operation and expands the volume of economic activities significantly, as companies' interest in listing on the "Nomu" market expresses strategic foresight and great keenness of company owners to develop their activities and strengthen their financial positions, which supports their goals for continuity and growth. Al-Yaish explained that despite the successes achieved by the parallel market "Nomu" in doubling the number of listed companies, there are still many companies that are hesitant to go through the listing process, either for fear of a decrease in the value of their shares or the dissipation of the centrality of their management or other concerns related to procedural or regulatory rules, which come within the framework of misconceptions about offering companies on parallel markets.
