Samer Choucair: Reforming Saudi IPO Pricing Is Essential to Improving Market Efficiency and Attracting Long-Term Capital
Entrepreneur Samer Choucair said reassessing the pricing mechanism for initial public offerings on the Saudi Exchange has become a strategic necessity to ensure efficient price discovery and strengthen the market’s ability to attract long-term institutional investment.
He noted that any weakness in pricing mechanisms directly affects the quality of capital allocation and investor confidence.
Samer Choucair explained that the growing debate surrounding the book-building process for IPOs is not limited to differences in participation opportunities between retail and institutional investors.
At a deeper level, it concerns the financial market’s fundamental role in determining the fair value of assets and directing liquidity toward companies capable of creating sustainable value.
Choucair noted that allowing institutions to submit substantial orders during the book-building stage without an upfront cash commitment, while requiring retail investors to provide the full subscription amount in advance, may in some cases inflate subscription figures and create a gap between reported demand and genuine demand supported by available liquidity.
“When prices are based on orders that are not backed by actual liquidity, the price-discovery process loses part of its credibility,” Samer Choucair said. “The IPO then shifts from a long-term financing instrument into a short-term share-distribution mechanism. Serious institutional investors seek markets where prices reflect genuine demand rather than the scale of competing bids.”
He added that the high subscription levels recorded by certain offerings, followed by pricing at the upper end of the indicated range and subsequent pressure on some shares after listing, demonstrate the importance of developing more precise mechanisms for measuring genuine demand before determining the final offer price.
Samer Choucair emphasized that advanced financial markets increasingly link institutional participation to actual financial capacity, assets under management, and the ability to honour commitments.
This reduces unrealistic orders and supports the development of more balanced valuations.
He explained that improving the book-building process does not mean reducing the role of institutional investors.
Rather, it means improving the quality of their participation by ensuring that final prices reflect considered investment decisions instead of competition to secure larger allocations.
Choucair noted that the Saudi market is undergoing an important transformation under the objectives of Vision 2030, as the Kingdom seeks to deepen its capital markets, expand the role of equities in corporate financing, and attract more domestic and international investors.
He said growing foreign participation and the increasing regional importance of the Saudi Exchange strengthen the need to apply the highest standards of transparency and governance to offering and pricing processes.
Market efficiency has become a central consideration in global capital-allocation decisions.
Samer Choucair explained that institutional investors assess market quality according to several factors, including pricing accuracy, the stability of share performance after listing, and the clarity of participation rules, rather than relying solely on reported subscription figures.
“Institutional investors do not avoid risk; they seek environments where risk can be measured and priced clearly,” Choucair said. “Uncertainty in the pricing mechanism may have a greater effect than the level of risk itself.”
He emphasized that a continuing gap between reported and genuine demand could weaken retail-investor confidence and limit companies’ ability to use the capital market as an effective fundraising channel, particularly as privatization programmes and projects associated with economic diversification continue to expand.
Samer Choucair noted that recent changes in retail-investor behaviour, including greater selectivity toward new offerings, reflect the market’s growing sophistication and the need for companies and regulators to strengthen the relationship between fair pricing and long-term performance.
He explained that potential reforms could include linking participation in the book-building process to clearer financial-capacity requirements or requiring cash guarantees or evidence of assets under management to demonstrate the seriousness of submitted orders.
Choucair said achieving this balance would produce more realistic price ranges, subscription levels that better reflect genuine demand, and greater share-price stability following listing.
This would benefit companies, investors, and the wider economy.
He noted that efficient pricing plays an important role in directing capital toward priority sectors during the next stage of Saudi Arabia’s economic transformation, particularly technology, industry, logistics, and new energy.
Choucair warned that persistently inaccurate pricing could encourage some institutional capital to seek alternative opportunities in debt instruments or in markets with clearer price-discovery mechanisms.
Samer Choucair emphasized that Saudi Arabia’s sukuk and bond markets are expanding significantly, making competition between investment instruments increasingly dependent on the equity market’s ability to provide a transparent and efficient environment for capital allocation.
“Long-term capital seeks markets where fundamental analysis and the ability to create value are rewarded, rather than markets driven by short-term bidding,” Samer Choucair said. “Reforming the pricing mechanism would be an important step toward strengthening the Saudi market’s competitiveness regionally and globally.”
Concluding his remarks, Choucair emphasized that the next phase in the development of the Saudi financial market will depend on building institutional confidence, improving disclosure quality, and strengthening the role of investors with long-term perspectives.
“If the Saudi market succeeds in developing more efficient and transparent pricing mechanisms, it will be better positioned to attract strategic investment and transform IPOs into a sustainable platform for financing economic growth,” Samer Choucair said.