Analysis: what a bonus issue does and does not say about the balance sheet

The transaction establishes one fact clearly. Arabian Centres had at least SAR (426,587,620) in retained earnings available for reclassification into share capital, and the resolution records that the regulator approved that reclassification. Retained earnings are distributable in principle; share capital is not, absent a formal capital reduction. Converting the one into the other narrows the company’s own future optionality on distributions in exchange for a larger capital base. The resolution does not state what the company plans to do with the retained earnings balance that remains after the transfer.

What the resolution does not establish is anything about trading value, earnings or cash generation. The company’s share of assets per holder is unchanged, and the market price adjusts for the additional shares. Reported earnings per share for prior periods become non-comparable with the new share count unless restated. The headline capital figure records the transfer; the retained earnings line shows the amount that moved and the distribution constraint that attaches to it once it becomes share capital.

The ratio itself carries information. One new share for every twelve is a modest increase, and it can be set against a peer transaction the same regulator approved a month earlier. On 09/07/2026 the CMA approved Axelerated Solutions for Information and Communication Technology Company raising capital from SAR (28,000,000) to SAR (56,000,000) by issuing (1) bonus share for every (1) existing share, funded from the same retained earnings account, taking its shares from (28,000,000) to (56,000,000). The two resolutions use identical language and the identical mechanism at very different scales. The Axelerated transaction doubles the share count; the Arabian Centres transaction adds a twelfth to it.

Scale is the point. Arabian Centres reported revenue of SAR 2,344.0 million for the year ended 31 December 2024G and SAR 2,253.7 million for the year ended 31 December 2023G, and its investment property portfolio was valued at SAR 28.3 billion as at 31 March 2025G. Against a portfolio of that size, SAR (426,587,620) transferred into capital is an adjustment to the composition of equity rather than a change to its total.

The next documents worth reading are the shareholders’ notice calling the extraordinary general assembly and the board resolution fixing the due date, since those two set entitlement and eligibility. Until the due date is announced, the record for the bonus issue is open and the resolution says only that it will be determined later.

What the documents say

The Capital Market Authority has cleared Arabian Centres Company (Tadawul: 4321) to raise its capital from SAR (4,750,000,000) to SAR (5,176,587,620) by issuing bonus shares, according to a resolution the regulator published with a date of 12/08/2026. No new money is raised. The increase is paid by moving SAR (426,587,620) out of the retained earnings account and into capital.

The mechanics set out in the resolution

Shareholders receive (1) bonus share for every (12) existing shares they hold. Entitlement runs to holders on the shareholders registry at the Security Depository Center as of the closing of the second trading day after a due date the company’s board will determine later. The share count rises from (475,000,000) shares to (517,658,762) shares, an increase of (42,658,762) shares.

The regulator attaches two conditions to the clearance. The extraordinary general assembly must be held within six months from the approval date, and the company must satisfy all regulatory requirements and applicable laws. Nothing in the resolution commits the company to a timetable beyond that outer limit, and the due date that fixes entitlement is left to the board.

A capitalisation issue of this kind moves an accounting balance rather than cash. Retained earnings that were already attributable to shareholders become share capital, and each holder ends up with more shares representing the same proportional claim on the same assets. The transaction alters the denominator in every per share figure the company reports, which is why the resolution states the old and new share counts as precisely as it states the riyal amounts.

The rule the approval sits under

The framework is Part 4 of the Rules on the Offer of Securities and Continuing Obligations. Article 55 covers share issuance and cancellation arising from a capital alteration at an issuer listed on the Main Market. Article 56 requires an issuer that wants to raise capital, by rights issue, share issuance with preemptive rights suspended, capitalisation issue, debt conversion, acquisition of a company or asset purchase, to obtain the Authority’s approval before calling the extraordinary general assembly. The same article sets the six month window: if the assembly’s approval is not obtained in that time, the Authority’s approval is deemed cancelled and the issuer has to apply again.

Article 58 is the specific gate for a capitalisation issue, and it is short. The issuer submits a letter of application containing the minimum information set out in Annex (24). There is no shareholders’ circular requirement of the kind Articles 59 and 60 impose on debt conversions and acquisition issues. Article 28 completes the picture by exempting shares issued as a result of a capitalisation issue from the prospectus requirement altogether, alongside employee share schemes and share splits.

That is a materially lighter path than the one a cash raise would take. The comparison worth holding in mind is Article 57, which caps a capital increase with preemptive rights suspended at (15%) of the issuer’s capital per issue, restricts the offer to qualified and institutional clients, and locks those investors in for six months after listing.

The issuer behind the capital line

Arabian Centres is the leading owner, developer and operator of shopping malls in Saudi Arabia by its own account, with malls including Mall of Arabia in Jeddah and Nakheel Mall in Riyadh. As at 31 March 2025G it operated 21 malls, had introduced cinemas at 16 of them, and counted more than 1,100 international, regional and local retail brands as tenants. Footfall across its malls reached 131.9 million in the year ended 31 December 2024G and 124.0 million in the year ended 31 December 2023G.

The company converted to a joint stock company in 2017G and listed on 27/05/2019G, when 95,000,000 ordinary shares representing 20% of its share capital were admitted to trading. Its market capitalisation was SAR 9.8 billion as at 31 March 2025G, with 33.7% in free float. It carries a long term issuer credit rating of BB with a negative outlook from Fitch Ratings, B+ with a stable outlook from S&P Global Ratings, and A- with a stable outlook on the local scale from Simah Rating Agency.

The CMA’s resolution is an approval of a request against a rulebook. It is not a statement about the merits of the increase, and the Authority publishes these notices in a fixed form that carries no assessment of the issuer’s prospects.