15 Jul 2024
RIYADH: Investors saw increased affordability and liquidity as 42 companies on Saudi Arabia’s benchmark index and parallel market benefitted from the nominal value split mechanism in 2023, official data showed.
In its latest update, the Capital Market Authority noted that the Kingdom’s parallel market, Nomu, saw significant momentum in stock split operations last year, with 24 companies, representing 37 percent of listed firms, implementing the measure.
This follows the CMA’s execution of the Companies Law and its Executive Regulations on Jan. 19, 2023, permitting listed firms to split stock par values from SR10 ($2.67) to various lower options.
As part of the mechanism, a company divides its existing shares into multiples to enhance trading volume and accessibility for investors, without altering its total market capitalization.
“The Companies Law allowed every company more flexibility to increase or decrease its stock nominal value, which is different from the previous mandatory ones that encompassed all companies with a unified nominal value,” said CMA.
It added: “The nominal value split of a share can be defined as increasing the number of a company’s shares to a larger number of shares with a lower nominal value, without any impact or change in the shareholders’ rights.”
This regulatory action, aimed at lowering per-share prices and increasing the number of tradable shares, evaluates the potential trading opportunities for a maximum number of investors.
On the other hand, 18 companies, comprising 8 percent of the listed firms on Saudi Arabia’s Tadawul All Share Index, also benefited from the mechanism last year.
The latest update also noted that seven listed companies reversed their split decisions for various reasons.
CMA plays a crucial role in advancing the goals outlined in Saudi Arabia’s Vision 2030, implementing various measures to transform the Kingdom into a favorable investment destination.
In its June report, CMA highlighted significant growth in the Kingdom’s sukuk and debt capital market since 2019, surpassing SR30 billion with an annual growth rate of 7.9 percent.
The report also emphasized that net foreign investments in the Saudi capital market reached SR198 billion in 2023, marking a 7.7 percent increase from the previous year.
Furthermore, Saudi Arabia’s capital market achieved prominent global recognition in 2023, ranking first among G20 countries in the Board of Directors Index.
CMA noted that these achievements underscore the Kingdom’s advancements in governance, market accessibility, investor protections, and overall market vibrancy.