By Abdullah Al-Salloum
As more companies come to market, investors should ask whether a listing is financing future growth or providing liquidity to existing shareholders.
A company’s decision to list is often read as a sign of maturity. It suggests that the business has grown large enough, organized itself well enough and accepted the disclosure standards required of a public company. In that sense, a listing can be a positive step. It broadens ownership, deepens the market and helps shape the structure of the national economy.
But not every listing carries the same economic meaning. The parties involved may all be pursuing profit, but they do not necessarily pursue it in the same way. Some transactions reflect the spirit of the market as well as its rules. Others may satisfy the formal requirements while leaving more difficult questions unanswered. The distinction matters: there is a difference between a listing that merely clears the regulatory threshold and one that serves the broader purpose for which capital markets exist.
This is why markets are regulated in the first place. Specialized authorities are meant to preserve fairness, protect confidence and ensure that smaller investors are not left at a structural disadvantage. A market left entirely to private incentives can easily shift from a venue for widening ownership and financing growth into one where the stronger party is better able to shape the narrative, choose the timing and market the opportunity. Confidence, not liquidity, is the first condition of a healthy market. Liquidity may bring investors in, but confidence is what keeps them there. It widens the investor base, attracts capital and creates a clearer relationship between companies and the public that invests in them.
That raises a legitimate question. Is it enough for a company to meet the formal requirements for listing, or should regulation also encourage a clearer reading of the purpose behind the transaction? Is the listing intended to raise new capital for growth, to provide liquidity to existing shareholders, or to do both? This is not a technical distinction. It is central to what investors are being asked to buy. The average retail investor does not enter an offering to assess its full impact on the economy. He is evaluating a specific opportunity. He looks at the price, the financial statements, profitability indicators, risks and growth prospects, then decides according to his objectives and investment horizon.
The company, meanwhile, is entitled to seek the best outcome for its owners. It may choose the timing, valuation and structure it believes are most favorable. That is part of the logic of markets. But once a company enters the public market, it is no longer dealing only with a private transaction. It is dealing with a broad base of investors and with a market that depends, above all, on trust. That is why formal compliance is not enough. A listing may satisfy the rules and still fall short of the market’s broader expectations.
Whatever the size of the company, the reputation of its owners, the sophistication of its advisers or the professionalism of its marketing, a listing carries responsibilities beyond regulatory compliance. These responsibilities begin with clarity. A capital increase is one thing. A partial exit by existing shareholders is another. The first raises questions about how the proceeds will be used, what expansion plan is being financed and what future value may be created. The second raises different questions: why are existing shareholders selling now, how was the company valued, and will the listing actually lead to stronger disclosure, governance and performance?
There is nothing inherently wrong with a partial exit. Founders, families and early investors may have legitimate reasons to sell part of their stakes. The problem arises when an exit is presented in the language of growth, or when governance is used as a slogan rather than a commitment.
If a partial exit is presented as a step toward greater transparency and better governance, then investors deserve follow-up disclosure and clear oversight. What will change after the listing? What obligations will make the company more disciplined and transparent for its new shareholders? How will the market know whether the promises made at the time of listing are being honored? If, on the other hand, the listing is a capital increase, the growth strategy should be clear. Investors should understand how the proceeds will be deployed and how those funds are expected to create value. General promises are not enough.
In this sense, a listing should be judged not only by whether it meets the requirements, but by whether its structure matches its stated purpose. Growth language should not be used when the substance of the transaction is mainly an exit. Governance language should not be used when it is not followed by a real commitment to better performance and stronger disclosure.
Regulation cannot guarantee good intentions. But it can raise the standard of disclosure, require clearer distinctions between types of offerings and monitor the justifications presented to the market. It can also help ensure that the public interest is not treated as a side effect of listing, but as part of its meaning. The market does not need more listings merely for the sake of numbers. It needs listings with a clear purpose, fair presentation and honest language. Companies should retain the right to raise growth capital or provide liquidity to existing owners. Investors, however, should have an equal right to know what they are buying: a future financed by new capital, or a stake in a successful past whose owners are partly cashing out.
May Allah guide this nation toward what is right and wise!
