Investors in Saudi Arabia are witnessing a period of increased affordability and liquidity, thanks to a strategic move by 42 companies listed on the Kingdom’s benchmark index and parallel market. These companies have benefited from a nominal value split mechanism, as revealed by recent data.
Momentum in Stock Splitting
The Capital Market Authority (CMA) of Saudi Arabia reported a surge in stock split operations within the Kingdom’s parallel market, Nomu. In the past year, 24 companies, which make up 37 percent of firms listed on Nomu, have embraced this mechanism. This follows the enactment of the Companies Law and its Executive Regulations on January 19, 2023, which allowed listed companies to adjust their stock par values from SR10 ($2.67) to various lower options.
Under this mechanism, companies can increase their shares by dividing existing ones, thereby enhancing trading volume and accessibility for investors, all while maintaining their total market capitalization. “The Companies Law has introduced greater flexibility, allowing companies to adjust their stock nominal values, unlike the previous mandatory uniform values,” stated the CMA. This flexibility aims to lower per-share prices and increase the number of tradable shares, thus maximizing trading opportunities for a broader range of investors.
Capital Market Growth and Global Recognition
In addition to benefiting from the stock split mechanism, 18 companies, representing 8 percent of those listed on the Tadawul All Share Index, also reaped the rewards of this initiative last year. However, it was noted that seven companies reversed their split decisions due to various reasons.
The CMA is instrumental in advancing Saudi Arabia’s Vision 2030 by implementing measures that transform the Kingdom into a top-tier investment destination. According to its June report, significant growth has been observed in the Kingdom’s sukuk and debt capital market since 2019, surpassing SR30 billion with an annual growth rate of 7.9 percent. Furthermore, net foreign investments in Saudi Arabia’s capital market surged to SR198 billion in 2023, marking a 7.7 percent increase from the previous year.
In 2023, Saudi Arabia’s capital market achieved remarkable global recognition, securing the top position among G20 countries in the Board of Directors Index. The CMA highlighted that these accomplishments reflect the Kingdom’s progress in governance, market accessibility, investor protections, and overall market dynamism.
