Between 2021 and 2025, Saudi Arabia's Tadawul and supported by key listings on the Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM)
witnessed over 150 listings collectively—driven primarily by Saudi Arabia's volume—with 53 IPOs in 2024 alone raising $13.2 billion, marking one of the most active years in MENA capital markets history (Saudi Arabia tops GCC IPO market, Arab News).

Together, they have raised over $50 billion since 2022 (The New Gulf IPO Playbook, AGSI), with institutional and retail investors competing to participate in what has become one of the world's most active IPO corridors (Gulf IPO momentum to extend into 2025 after strong $13B year, S&P Global).

However, beneath the record-breaking demand, does lie a structural challenge: retail investors in the free-float quota face increasingly microscopic allocations, due to extreme oversubscription rates, often receiving as few as 10 shares per subscriber even when applying for hundreds or thousands (Tadawul defies global IPO slump, Arab News).

This analysis examines the regulatory framework, the oversubscription phenomenon, and market dynamics that create this allocation squeeze, drawing on recent academic research to contextualize the GCC experience within global IPO theory.

Last week’s retail IPO of Alramz Real Estate Co. on the Main Market (TASI) was only 36% subscribed, which we understand it is a notable deviation from the  "oversubscription phenomenon" observed in GCC markets not just the past few years (2021-2024), which’s the scope of this analysis, but also historically since 1990s.

The Free Float Requirements

The regulatory frameworks governing free float in Tadawul, ADX, and DFM set minimum thresholds that appear reasonable on paper, but in practice are applied with strategic flexibility. 

On Tadawul's Main Market, companies must offer at least 30% of their share capital to the public at the time of listing, with a minimum of 200 public shareholders (Listing Rules, CMA).

For the Nomu-Parallel Market, this requirement falls to 20% with a minimum of 50 public shareholders (A look at listing requirements, Argaam). 

However, Tadawul and the Capital Market Authority can permit lower percentages if sufficient market liquidity is expected, giving issuers room to retain greater control (Listing Rules, CMA).

ADX requires that at least 20% of a company's shares be offered to the public, with a minimum of 100 shareholders (Listing on ADX, ATB Legal).

Critically, ADX may waive this 20% threshold if the company's market capitalization exceeds AED 500 million and the exchange deems the available shares sufficient for reasonable trading volumes (Equities - ADX).

DFM historically required 30% free float but amended its rules in 2025 to reduce the minimum to 20% for the Main Market, lowering the barrier for new listings (Dubai expands capital market depth).

Nasdaq Dubai, also regulated by the DFSA, maintains a 25% minimum free float (Nasdaq Dubai Listing Criteria).

The structural challenge 

These requirements, while moderate compared to some global exchanges, do create a structural challenge: issuers prefer to retain majority control and limit dilution, while index providers (FTSE, MSCI) calculate weightings based on free-float-adjusted market capitalization (FTSE ADX Index Series).

 

The result is that many issuers aim for minimum compliance, keeping large strategic blocks locked and leaving a relatively small effective free float available for trading—and an even smaller portion allocated to retail tranches.

In doing so, the company listing itself in a stock exchange meets only the essential or baseline regulatory and listing requirements necessary to get their shares publicly traded.

Consistent pattern in GCC IPOs and Emerging Economies 

Most GCC IPOs divide their offerings into tranches: a qualified investor (institutional) tranche and a retail tranche. 

Retail tranches typically represent 10-15% of the total offering (CMA urges companies to boost retail investor allocations, Argaam), which means that if a company floats 30% of its capital, retail investors are competing for perhaps 3-4.5% of total shares.

When demand is strong, this small retail allocation does become the epicenter of oversubscription. 

For example, Parkin's DFM IPO in 2024 raised AED 1.6 billion and was oversubscribed 165 times, attracting AED 259 billion in demand (Parkin completes record-breaking IPO, WAM).

In the GCC region, companies usually save the biggest slice of the pie (around 90%) for "Qualified Investors" (big banks and pension funds) because they provide long-term stability.

Parkin initially planned to give retail investors only 10%. But because the demand from the public was so overwhelming that they decided to increase it to 12%.

It highlights that even when they increased the supply, it still wasn't nearly enough to satisfy the demand.

Similarly, DEWA's 2022 retail IPO, which raised AED 22.3 billion, was oversubscribed 37 times (DEWA Final Price Announcement, DEWA).

The "Free Float" in DEWA’s case was the 18% of the company that the government decided to sell. It proves that the "thirst" for shares (demand) was so powerful that it could swallow up a massive AED 22.3 billion ocean of supply (Free Float) and still ask for 37 times more.

With retail representing around 12% of the allocation, subscribers received minimal stakes. Similarly, DEWA's 2022 IPO, which raised AED 22.3 billion, was oversubscribed 37 times (DEWA Final Price Announcement, DEWA).

Academic research on the Indian market does confirm this scarcity effect operates systematically across emerging markets. (Das, Megaravalli, and Babu 2023)

The fewer shares offered to the public negatively impacts oversubscription in Indian IPOs; namely, as the limited offer tends to lead to higher oversubscription and accordingly creates a perception of scarcity.

A quantile regression analysis reveals that this scarcity effect is strongest at median oversubscription levels, precisely where most of the GCC IPOs cluster.

 

      

     Quantile regression analysis is a statistical method that helps you understand how different factors influence not just the average outcome, but also outcomes at various points, like the lowest, median, or highest, within a dataset.

 

The Oversubscription rates reaching record levels like 165 times available shares demonstrate the severe allocation squeeze facing retail investors in GCC IPO markets.

Saudi Tadawul Group's 2021 IPO saw retail oversubscription of 443%, with each retail subscriber receiving just 10 shares (Saudi Tadawul Group retail IPO, Argaam). 

This "10-share allocation floor" has become a recurring feature in Tadawul IPOs, effectively capping retail participation, regardless of the application size.
 

Why GCC IPOs Are Consistently Oversubscribed
 

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From Listing Premium to Open-Market Test

The role of the market in recent offerings has shifted from granting an almost automatic listing premium to a stricter test in the open market. Initial prices are no longer shielded by the momentum of scarcity; instead, they are subject to the forces of supply and demand as soon as trading begins.

The chronic oversubscription in GCC IPOs is driven by a confluence of demand-side and supply-side factors that create what economists term a "hot issue market."

From an academic perspective, IPO underpricing—the tendency for shares to be offered below their fair market value, resulting in first-day gains—is actually a well-documented phenomenon globally. 

One analysis employed machine learning techniques on 4,980 U.S. IPOs and identified price revision, underwriter agency measures, and free-float fraction as the three most powerful predictors of first-day returns.
 

   

Price revision: Changes made to the initial price range proposed for an IPO before the shares are actually sold to investors.

Underwriter agency measures: Metrics that assess how effectively the investment bank (underwriter) is representing the issuing company's interests during the IPO process.

The machine learning analysis does demonstrate that these factors capture approximately 60% of variation in underpricing (underpricing differs from one IPO to another) with the remaining 40% is attributable to latent firm fundamentals.

In the GCC context, this dynamic is amplified by several region-specific drivers (such drivers might include a dominant presence of government or family-owned businesses, specific local regulatory environments.) (Colak, Fu, and Hasan, (2025) 

First-day performance in GCC IPOs, even among weaker performers, remains attractive.

Parkin opened 30% above its offer price on its first trading day.
Spinneys rose 11%. Miahona, which listed on Tadawul in May 2024, surged by 147% within its first 30 days of trading.

Even IPOs that underperform on debut, such as Talabat (which closed 6.9% lower on its first day), often recover within weeks.
 

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Investment News Does Not Always Translate into Immediate Price Support

In the first trading days, markets tend to respond more to short-term liquidity pressures than to news with medium- or long-term investment impact.
Accordingly, announcements of expansion deals or strategic investments—despite their fundamental importance—do not necessarily reflect immediately in the stock price. Their effects materialize gradually as execution becomes clearer and plans transform into actual cash flows.

 

First-day IPO performance for selected major GCC listings demonstrates the persistent underpricing pattern that drives retail oversubscription.
 

The revenues bias factor
 

Another academic extensive research helps us in our analysis in providing critical context for understanding the allocation mechanisms behind this underpricing. (Jenkinson and Jones (2016)

The comprehensive study of 220 UK IPOs documents that investment banks face acute conflicts of interest: annual revenues from institutional investor clients  dwarf IPO underwriting fees  by a factor of 50:1. 

Investors in the top revenue quartile receive allocations 60% more favourable than those with no existing banking relationship.

This  dynamic—where underwriters reward high-revenue clients with preferential allocations of underpriced shares—does create systematic allocation bias against retail investors who generate minimal ancillary revenues for investment banks.

Accordingly, state-linked and high-profile issuers dominate supply.
 
Another academic study of the Saudi market demonstrates that market sentiment and trust mechanisms play a decisive role in subscription behaviour. 

Their survey of 41 Saudi market participants does reveal that underwriter reputation is ranked as a primary determinant of IPO success, often outweighing fundamental valuation metrics.


This finding creates a paradoxical flight to safety—investors flock to government-linked listings (like DEWA or Parkin) not just for their economics, but because state backing acts as a proxy for transparency and execution certainty in a market where trust is the ultimate premium.

Abundant domestic liquidity and limited alternative vehicles for retail participation further intensify demand.

High household savings, low equity market correlation with global volatility, and the absence of robust mutual fund or ETF ecosystems channel retail capital directly into IPO subscriptions.

Social proof via media coverage, WhatsApp groups, and broker promotions amplifies herd behaviour.

   

      

     Exchange-Traded Fund (ETF) is a type of investment fund that holds a collection of assets like stocks, bonds, or commodities. It trades on stock exchanges throughout the day, just like a regular stock.

IPO Activity Trends: 2021-2025

Since 2021, the volume and momentum of GCC IPO activity has accelerated dramatically. In 2024, the GCC region collectively raised $13.2 billion from 53 IPOs, with Saudi Arabia leading at $4.1 billion across 42 offerings (Saudi Arabia tops GCC IPO market).

Tadawul has been the consistent driver of volume, hosting 38 IPOs in 2022 (2022: a record year for MENA IPOs) and 42 in 2024, while ADX and DFM have seen more selective but high-value activity. 

This sustained pipeline ensures that demand-supply imbalances in retail tranches do remain a persistent structural feature.
 

Tadawul has dominated GCC IPO activity since 2021, with a sustained pipeline of offerings that has created consistent demand-supply imbalances in retail tranches.

It’s note worthy that retail investors in GCC IPOs must typically fund their subscriptions upfront, with capital locked during the subscription period. 

In Saudi Arabia, subscribers do apply through authorized brokers or banks, committing full payment for the shares requested (Saudi Tadawul Group Prospectus).

Consequent upon allocation, refunds for unallocated amounts are processed within days. Minimum subscription amounts vary—often set at 10 shares—with maximum limits (e.g., 250,000 shares) to prevent single investors from dominating retail tranches (Retail subscription for Saudi Tadawul Group IPO, Argaam).

In the UAE, similar type of mechanics apply. Subscribers fund applications through designated receiving banks, with refunds issued post-allocation (NMDC Energy IPO).

The upfront requirement acts as both a commitment mechanism and a liquidity filter, ensuring serious demand while temporarily tying up substantial retail capital.

The Apps and Notification Tools: Information Is No Longer the Barrier

Awareness of upcoming IPOs has been democratized by mobile apps and real-time notification tools. 

Argaam On, launched in October 2025, provides retail investors with IPO calendars, price alerts, and subscription deadlines (Argaam launches subscription-based app, Argaam). 

Competing tools include brokerage apps (Emirates NBD IPO Portal, Al Rajhi Capital) and exchange-native apps (Tadawul, ADX, DFM mobile platforms).

However, information is no longer the constraint—allocation probability is. 

Retail investors are fully aware of upcoming offerings, but do face structural disadvantages in securing meaningful stakes.

Sectoral Trends: Healthcare, Consumer, and Energy Lead Demand

Analyzing the IPO activity between 2023-2025 does reveal clear sectoral preferences among retail investors.

In 2024, energy led GCC IPO proceeds with nearly 28%, driven by NMDC Energy and Oman's OQ E&P (Saudi Arabia tops GCC IPO market, Arab News).

Consumer staples (24%) and consumer discretionary (20%) followed, with Lulu Retail, Spinneys, Talabat, and Nice One attracting substantial retail buzz.

Healthcare captured 10% of proceeds, led by Dr. Soliman Fakeeh Hospital and Almoosa Health Group in Saudi Arabia, both of which saw strong post-listing performance (Saudi Arabia tops GCC IPO market, Arab News).

 Energy, consumer, and healthcare sectors dominated GCC IPO activity in 2024, reflecting government privatization priorities and diversification objectives of Vision 2030.

In 2023, the UAE dominated with $6.07 billion raised from eight IPOs, including ADNOC Gas (UAE 2023 IPO listings, Aurora50).

In 2025, consumer markets accounted for 42% of Q1 IPO proceeds, reflecting he investor appetite for lifestyle and retail sectors aligned with diversification goals of Vision 2030 (GCC IPO Q1 2025, Middle East Briefing).
 

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Has the Role of IPOs in the Market Changed?

Recent developments suggest that the role of IPOs in the Saudi market may be undergoing a transformation—from a tool for short-term listing gains to a channel for financing long-term projects and investments.
In this context, a stock’s performance on the first day becomes less indicative of the company’s future value and more tied to liquidity dynamics and immediate trading behavior.

The evidence is clear: moderate free-float requirements, concentrated ownership structures, and extreme oversubscription create or lead to a persistent allocation squeeze for retail investors.

This dynamic mirrors global IPO theory on allocation bias against retail, but with regional amplifiers. 

For policymakers and exchanges, the challenge is balancing market depth with equitable access—ensuring that the IPO boom benefits not only institutional capital but also the retail investors whose participation underpins market liquidity.