DEFICIT 13 2.1.12 RISKS RELATED TO THE INCREASE IN THE COMPANY’S CURRENT LIABILITIES AGAINST ITS
2.3 RISKS RELATED TO OFFERED SECURITIES
2.3.1 RISKS RELATED TO POTENTIAL FLUCTUATIONS IN THE RIGHTS’ PRICE
The market price of Rights may be subject to significant fluctuations due to the change in the factors affecting the Company’s share. This fluctuation may be large due to the difference between the allowed daily fluctuation percentage (which is represented by 10% up and down from the closing price of the previous day) for rights compared to the daily allowed fluctuation percentage for the Company’s shares. The Rights trading price depends on the trading price of the Company’s shares and the market’s view of the fair Rights price. These factors may adversely affect the Rights trading price.
2.3.2 RISKS RELATED TO POTENTIAL FLUCTUATIONS IN THE SHARE PRICE
The market price of the rights issue during the trading period may not be an indication of the market price of the Company’s shares after the Offering. In addition, the Company’s share price may not be stable and may be affected significantly due to fluctuations resulting from market conditions related to the Company’s current rights issue or shares. These fluctuations may also result from many factors, including but not limited to: stock market conditions, poor performance of the Company, inability to implement the Company’s future plans, entry of new competitors to the market, change in the vision or estimates of experts and analysts of the stock market, and any announcement of the Company or any of its competitors relating to mergers and acquisitions or strategic alliances.
The sale of large quantities of shares by the shareholders or the belief that such sale is likely to occur will negatively affect the price of the Company’s shares in the market. In addition, shareholders may not be able to sell their shares in the market without negatively affecting the share price. There is no guarantee that the market price of the Company’s shares will not be
lower than the Offering price, and if such occur after investors have subscribed to the new shares, the subscription cannot be canceled or modified. Therefore, investors may incur losses as a result. In addition to the above, there is no guarantee that the shareholder will be able to sell his shares at a price equal to or greater than the offer price after subscribing to the new shares.
2.3.3 RISKS RELATED TO NON-PROFITABILITY OR SELLING OF THE RIGHTS
There is no guarantee of profitability per share by trading it at a higher price. In addition, there is no guarantee that it can be sold at all, which indicates that there is no guarantee of sufficient demand in the market to exercise the rights issue or receive compensation from the Company, bearing in mind that the investor who did not subscribe or sell his rights, and the owners of fractional shares, may not obtain any consideration if the sale took place during the remaining Offering period at the Offering price.
2.3.4 RISKS RELATED TO FUTURE DATA
The future results and performance data of the Company cannot be actually predicted and may differ from what is contained herein. As the achievements and ability of the Company to develop is what determines the actual results, which cannot be expected or determined. The inaccuracy of the data and results considered one of the risks that the shareholder shall know so as not to affect his/her investment decision. Whereas, in the event that the future results and performance data are fundamentally different from those mentioned herein, such will lead to the loss of part or all of the shareholders’
investment in the Company’s shares.
2.3.5 RISKS RELATED TO POSSIBILITY OF ISSUING NEW SHARES
The issuance of any new shares by the Company depends on the approval of the Extraordinary General Assembly of the shareholders. In the event that the Company decides to issue new shares as rights issue to increase its capital, and the shareholders’ EGM approved this decision, and the shareholders have not exercised their rights by subscribing to the new shares, the ownership of the shares will decrease proportionately in addition to its attachments from the right to vote and obtain profits, which will affect on the market price of the share.
2.3.6 RISKS RELATED TO LACK OF DEMAND FOR THE COMPANY’S RIGHTS AND SHARES
There is no guarantee that there will be sufficient demand for the rights issue during the trading period, to enable the rights issue holder (whether a registered shareholder or a new investor) to sell the rights issue and make a profit out of it, or to enable him to sell the rights issue at all. Moreover, there is no guarantee that there will be sufficient demand for the Company’s shares by institutional investors during the Rump Offering period. In the event that the investment institutions did not submit offers for the remaining shares at a high price, there may not be sufficient compensation to be distributed to the holders of the rights issue who did not exercise their right to subscribe, or to the holders of fractional shares. there is no guarantee that there will be sufficient demand in the market for the shares obtained by a subscriber either through the exercise of the rights for these shares, through the residual Offering or through the open market.
2.3.7 RISKS RELATED TO OWNERSHIP RATIOS’ DECLINE
If the rights holders do not fully subscribe to the new shares, their ownership and voting rights will be reduced. Also, there is no guarantee in the event that the restricted rights holder wishes to sell his priority rights during the trading period, that the return he receives will be sufficient to fully compensate him for the decrease in his ownership percentage in the Company’s capital as a result of the increase in its capital. There is as well no guarantee that there will be a compensation amount distributed to the eligible shareholders who did not exercise their right to subscribe or to the owners of fractional shares in the event that the investment institutions did not submit offers for the remaining shares.
2.3.8 RISKS RELATED TO NON-EXERCISING THE RIGHTS IN A TIMELY MANNER
Subscription Period will start on Thursday 15/09/1444H (Corresponding to 06/04/2023G) and end on Tuesday 05/10/1444H (Corresponding to 25/04/2023G). Rights holders and the financial intermediaries they represent shall take appropriate measures to follow all necessary instructions prior to the expiry of the subscription period. If eligible shareholders fail to properly exercise the subscription rights by the end of the subscription period, based on their rights issue, there is no guarantee that there will be an amount of compensation distributed to the non-participants eligible shareholders or who did not exercise the subscription properly or to the holders of fractions shares.
2.3.9 RISKS RELATED TO DIVIDENDS TO SHAREHOLDERS
Future earnings per share depend on a number of factors, including the Company’s profitability, maintaining its good financial position, capital needs and distributable reserves, the Company’s available credit strength, and general economic conditions. An increase in the Company’s capital may lead to a decrease in the earnings per share in the future on the grounds that the Company’s profits will be distributed to a larger number of shares as a result of the increase in its capital.
The Company does not guarantee that any dividends on the shares will be actually distributed, nor does it guarantee the amount that will be distributed in any particular year. Dividend distribution is subject to certain restrictions and conditions stipulated in the Company’s Articles of Association.
2.3.10 RISKS RELATED TO SPECULATION IN RIGHTS ISSUE
Speculation in the Rights is subject to risks that could cause material losses. The permissible daily fluctuation range for the priority Rights trading price exceeds the permissible daily fluctuation range for the market price (which is represented by (10%) up and down from the previous day’s closing price). There is also a direct relationship between the Company’s share price and the right’s indicative value. Accordingly, the daily price limits (i.e. the daily fluctuation range) for Rights trading will be affected by the daily price limits for stock trading. In the event that the shareholder does not sell the Rights before the end of the Trading Period, then he will have two options either to exercise these Rights to subscribe to the New Shares or bear some losses. Therefore, investors should review the full details of the listing and trading mechanism of new Rights and shares and how they operate, and should be familiar with all the factors affecting them, in order to ensure that any investment decision is based on full knowledge and awareness.
2.3.11 RISKS RELATED TO LACK OF SHAREHOLDER’S AWARENESS OF TRADING MECHANISM AND THEIR EXERCISE OF RIGHTS
Despite the publication by the Authority and the Saudi Tadawul of educational materials and special workshops to familiarize investors with rights and the method of raising capital through issuance of rights shares and how to subscribe, trade and others, may be difficult for some shareholders and investors to understand the mechanism of trading rights, especially the method of calculating the final price, Which could miss the opportunity for shareholders to make a timely and appropriate decision. This may also adversely affect shareholders’ willingness to invest and trade in them, which would result in a lower percentage of their ownership in the Company, which would harm the investment of those who did not use their rights to underwrite, especially if no compensation was distributed to them.
2.3.12 RISKS OF SUSPENDING TRADING OR CANCELING THE COMPANY’S SHARES AS FAILURE TO PUBLISH ITS FINANCIAL STATEMENTS WITHIN THE STATUTORY PERIOD
In the event that the Company is unable to publish its financial information within the statutory period (30 days from the end of the financial period for the initial financial statements, and three months from the end of the financial period for the annual financial statements), the procedures for suspending the listed securities shall be applied in accordance with the listing rules approved by the decision of the Board of the Capital Market Authority No. (1-22-2021) dated 12/07/1442H (corresponding to 24/02/2021G) and its amended No. (1-52-2022) dated 12/09/1443H (corresponding to 13/04/2022G) , which stipulates that the market suspends trading of securities for a period of one trading session following the expiry of the statutory period. In the event that the financial information is not published within twenty trading sessions following the first suspended trading session, Tadawul shall announce the re-suspension of the Company’s securities until it announces its financial results. In the event that the suspension of trading the Company’s shares continues for a period of six months without the Company taking the appropriate measures to correct that suspension, CMA may cancel the listing of the Company’s securities. The financial market lifts the suspension after one trading session following the announcement of the Company’s financial results. In the event that the Company being late in announcing its financial results, or if it being unable to publish them within the statutory period referred to above, such will cause the Company’s shares to be suspended or canceled from the listing, which will negatively and materially affect the interest of the Company’s shareholders, the Company’s reputation and the results of its operations.