Markets
Saudi Arabia: a 15% conversion ceiling
A Tadawul-listed company can issue a convertible debt instrument, but not one an investor can draw on repeatedly. The Capital Market Authority's Rules on the Offer of Securities cap the shares into which such instruments may convert at 15% of the issuer's total shares, and bar a further private placement of them for twelve months after the offer ends.
Key takeaways
- A hard dilution ceiling. The number of shares into which أدوات دين قابلة للتحويل (convertible debt instruments) may be converted shall not exceed 15% of the issuer's total number of shares.
- A frequency lock. Convertible debt instruments shall not be offered by way of طرح خاص (private placement) more than once during the twelve months following the end of the offer.
- Conversion shares are registered separately. The issuer must apply to the CMA for registration of the shares resulting from conversion before they can be admitted and traded.
- The general assembly gates the instrument. Issuing debt instruments or sukuk requires approval by the الجمعية العامة غير العادية, the extraordinary general assembly, under the Companies Law issued by Royal Decree M/132 of 2022.
- The pricing rule is missing, not permissive. No CMA provision either permitting or prohibiting a conversion price referenced to future market prices was located. That gap is the single most important thing on this page.
Two numbers, and what each of them actually forecloses
The CMA amended the Rules on the Offer of Securities and Continuing Obligations in August 2022 to build out a framework for convertible debt instruments, including private placements of them by listed companies and exchangeable instruments. Two provisions do most of the work.
The 15% ceiling is a limit on the instrument, not on a tranche. It bounds the total number of shares the convertible can ever become, which means it also bounds the consequence of any pricing mechanic attached to it: a conversion price that fell would produce more shares per riyal until the ceiling stopped it, and then stop. That is the opposite of the open-ended headroom a market-referenced structure is designed to exploit.
The twelve-month restriction is the one that decides the facility question. A drawdown structure is by definition a series of private placements of the same instrument to the same investor. A rule that permits only one such placement in the twelve months following the end of an offer is directly hostile to that cadence, whatever the parties agree between themselves.
| Question | What the CMA rules do | Effect on the structure |
|---|---|---|
| How much dilution | Cap conversion shares at 15% of total shares | Sized once; cannot grow with the share price |
| How often | One private placement of convertibles in twelve months after the offer ends | A drawdown cadence is unavailable |
| Who approves | Extraordinary general assembly, then CMA registration | Corporate and regulatory gates in series |
| How the price is set | No rule located, in either direction | Open — and capable of moving the verdict |
| Rule summaries as at 12 August 2026. Not an offer, a quote, or a rate card. | ||
What the rulebook does not say, said plainly
Research for this page found no Saudi rule permitting a conversion price referenced to a future trading average, and none prohibiting one. There is no minimum-price formula of the kind India and China apply, and no maximum-discount cap of the kind Hong Kong applies. The constrained verdict here therefore rests entirely on the ceiling and the frequency restriction. If Saudi counsel establishes that the CMA will not accept a refixing price, the honest answer for this market becomes closed. That is a live possibility, not a hedge.
Conversion does not, by itself, produce a tradable share
This is the step most often missed. On conversion the issuer must submit an application to the CMA for the registration of the shares resulting from conversion, in accordance with the Rules and as the CMA prescribes; only after registration and admission do those shares trade on the Saudi Exchange. Saudi Arabia has no United States-style restricted-securities concept, so nothing resembles the analysis behind free-trading shares — the constraint is an application, not a clock. It should never be described with a promised date.
Nomu is a different animal
The Parallel Market is where a smaller Saudi issuer sits, and it is restricted to qualified investors. That qualification layer is itself a constraint on who may hold and on where converted stock can be sold, and it sits on top of the ceiling and the registration step rather than in place of them. Foreign access to the Main Market has been progressively liberalised; Nomu's eligibility rules were not reviewed for this page.
General information, not legal advice. The 15% ceiling, the twelve-month restriction and the conversion-share registration requirement are quoted from reproductions of the CMA rule text; no article number is published here because none could be verified against the CMA's own document. The Companies Law article requiring general assembly approval is likewise uncited. Take advice from qualified Saudi counsel.
If you are listed on Tadawul or Nomu, the two facts that matter before terms are your total share count against the 15% ceiling and when your last private placement of convertibles ended. Send both. For how the instrument behaves without a ceiling, read convertible debt financing; for the drawdown mechanic that Saudi rules foreclose, read equity facilities.
- All markets
- UAE: the regulator prices it
- Qatar: approval per offering
- Kuwait: a par floor
- Hong Kong: a capped discount
Primary sources
- CMA — Rules on the Offer of Securities and Continuing Obligations
- CMA — regulations and rules index
- Saudi Exchange — Main Market and Nomu
Financing a Saudi listed issuer: frequently asked questions
How much dilution can a Saudi convertible instrument create?
The number of shares into which convertible debt instruments may be converted shall not exceed 15% of the issuer's total number of shares. That is an absolute ceiling on the instrument rather than a limit per tranche, so it also caps how far a conversion price could dilute even if that price were allowed to move.
Can a Saudi issuer keep drawing on a convertible facility?
No. Convertible debt instruments shall not be offered by way of private placement more than once during the twelve months following the end of the offer. A structure built on repeated tranches to the same investor runs directly into that restriction, which is why Saudi Arabia supports a single sized instrument rather than a drawdown facility.
Is a floating conversion price permitted in Saudi Arabia?
Unresolved, and it should be treated that way. No rule was located that either permits or prohibits a conversion price referenced to future market prices, and no minimum price or maximum discount rule was found. The constrained verdict on this page rests on the dilution ceiling and the frequency restriction, not on a pricing rule, and counsel could settle the point either way.
When do Saudi conversion shares become tradable?
Not automatically on conversion. The issuer must apply to the Capital Market Authority for registration of the shares resulting from conversion, and only after that registration and admission do those shares trade on the Saudi Exchange. It is a discrete regulatory step with its own timetable, and no date for it should be treated as promised.
If this is about a live situation
Tadawul supports one convertible at a time rather than a facility: 15% of the register is the conversion ceiling, and a further private placement is barred for twelve months after the offer closes. That makes sizing the first instrument the whole decision, and the instrument comparison is where those shapes sit.