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CMA issues new rules for IPOs

5 May 2021

In a move to further improve the transparency and efficiency of the initial public offerings (IPOs) in the Omani capital market, the Capital Market Authority (CMA) on Wednesday issued new rules on pricing of shares offered to investors through the public offerings.

H E Sheikh Abdullah bin Salim al Salmi, executive president of the CMA, has issued a decision approving new rules for specifying the price of shares in the public offerings. Decision 43/2021 was issued based on the Regulation for Public Joint Stock Companies which was issued earlier this year.

The new rules aim to regulate the IPOs through specifying the methods for determination of prices of shares in the offerings and the procedures to be followed to ensure a sound pricing process, according to a statement issued by the CMA.

Mohammed Said al Abri, vice president of capital market sector at the CMA, said the new rules for specifying the offer price will contribute in enhancing the readiness of legislative infrastructure of the IPOs in Oman.

“This will provide a clear legal framework for the IPO pricing mechanism by furnishing an appropriate environment for determining the fair offering price objectively and transparently,” he said.

While encouraging the adoption of the book-building method in the IPOs, the new rules allow the issuer to continue specifying the offer price through the issue manager by using the fixed-price method which has been applied for years in Oman. 

However, in such case, the CMA will appoint a third party (from entities licensed to carry out issue management business or licensed audit firms) on the expenses of the IPO issuer to conduct an independent evaluation to recommend the appropriate price for the offering and the issuer will be obliged to offer the shares at the recommended price or the price proposed by the issue manager, whichever is less.

The book-building process, the CMA said, is the most transparent method for pricing the IPOs in regional and global markets as this method discovers a fair price for the IPO by involving investors to explore and determine the offer price.

Under the book-building IPO process, the issuer receives applications from a large number of subscribers containing their proposals for quantities and prices of shares within a specific price band. 

The bids are collected from investors at various prices, which are above or equal to the floor price and the offer price is determined after the bids are closed.

The new rules, as per the CMA, emphasise that the issue manager should provide adequate information to the public on the IPO and the pricing method through book-building in various media platforms to address any ambiguity or concerns of small subscribers specifically when subscribing at the highest limit of the price band.

 

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