SME’s are among the most vital agents in creating a steady growing economy. The kingdom’s vision 2030 is reassuring the importance of the SME’s role not only in contributing to the GDP but also in creating new job opportunities. Under the vision 2030 the Kingdom is launching a parallel equity market called Nomu (growth in English). This innovation in the Stock Exchange market aims to attract companies to go public; this development will mobilize an increased supply of capital and will stimulate economic growth.
Parallel markets have existed since the 1970’s. In the USA there is NASDAQ and in the UK the highly successful Alternative Investment Market (AIM).Although Germany’s Neuer market was disappointing due to the lack of sufficient supervision and weak regulations. All data from past and present experiences demonstrates that the parallel market has progressive impact in the overall capital market, the economy’s productivity and creating a more attractive environment for entrepreneurship and employment.
The Saudi Stock Exchange Market is becoming more diverse, satisfying the requirements of the National Transformation Platform and vision 2030. On a broad and narrow spectrum this expansion of listed companies in the stock exchange will generate more capital and contribute to the GDP. Currently SMEs contribution to Saudi’s non-oil GDP is approximately 21%. According to the SME Administration in Saudi, if the SME contribution reached global levels, this will add an extra SAR 1.1 trillion to the GDP
Nomu regulatory frame work:
The Capital Market Authority (CMA) and Tadawul have officially launched Nomu on the 26th of February 2017. The Nomu regulations are looser than Tadawul TASI yet tighter than some global parallel market regulations. An authorized person (AP) must be appointed as an associate between the CMA and the issuer to confirm and meet all the required conditions for issuance.
Nomu main regulations:
• Saudi and GCC companies (majority owned by GCC nationals) are eligible for listing.
• Only qualified investors are permitted to invest in listed shares:
• Corporates, government-owned companies, GCC funds and companies, investment funds and discretionary portfolio managers.
• Natural persons: 1) Conducted 10 transactions with a minimum of SAR 40 million per quarter over the past 12 months on TASI.
2) Or a portfolio size exceeding SR10 million in last year. 3) Or holds relevant and suitable CMA-recognized certificates.
• Qualified Foreign Investors (QFIs) are able to participate, as per previous guidelines laid down by the CMA
• A minimum of SAR10 million market capitalization with at least 20% of total shares listed.
• If the market value of shares is greater than SAR 40 million with a minimum of 50 shareholders, or if the market value of shares is less than SAR 40 million with a minimum of 35 shareholder.
• New Companies to be listed must be active and fully operating for a minimum of one financial year.
Benefits of Nomu:
1. After experiencing the success of parallel markets in the US and Europe, Nomu is created with the objective to achieve success in creating a more diverse capital market.
2. Another advantage is the high-level of transparency which should encourage more financial investment.
3. Relatively lower cost of listing compared to TASI. However, Nomu has lengthier timelines in submitting financial statement yet the level of financial disclosure is lower than TASI.
4. Companies listed in Nomu can transition later to TASI. The move to the main market will result in an increase in the company’s profile.
The launch of NOMU is a very positive development for SMEs in Saudi Arabia and potentially opens up a new source of capital.