More primary issues to boost liquidity, foreign participation
25/09/2014 00:15 AST
After Marka’s spectacular debut on Thursday, investors should be bracing for more Initial Public Offering (IPO). A lead adviser to the companies planning for an IPO expects bulk of the IPO’s to come next year after a steady pipeline in 2014.
“It’s a process that takes around 6-9 months because the decision will be requiring board’s approval and legal work etc. I’m expecting busy period next year [for IPO’s] We are expecting a number of announcement by the end of the year, though bulk of the announcement will come next year,” Riad Meliti, chief executive officer at Arqaam Capital said.
Marka’s IPO on Thursday is the first one after a hiatus of 5 years. The much-talked about Emaar Malls Group will also get listed later this week, plus many more family owned businesses have shown intentions to list on exchanges. The Abu Dhabi Securities Exchange also expects at least two listings by the end of the year, although they are talking to 4 potential companies. ADX has been trying to get more companies in health, retail, education, petrochemicals to become a part of the index.
“We believe that the outlook for IPO activity overall is positive in view of the substantial list of companies of companies which are ready to take this route. Perhaps the first indication that supports this belief is the successful issuance and listing of Marka shares and the preparations for the IPO of Emaar Malls in the coming period,” said Essa Kazim, chairman of Dubai Financial Market.
Control:
Additionally, the ADX has also been convincing companies to list on its exchanges, but most family run businesses run into a debate on control of the company post listing.
“We try to show them the value-add of converting from private to public. The issue with the family is power, they say, ‘We have spent 30-40 years to start the company.’ They fear that they might lose power. Then we show them examples of IPOs in the GCC,” said Rashed A. Al Blooshi, CEO, Abu Dhabi Securities Exchange.
“They are liking the idea of an IPO. They are looking at others and in a matter of time, they will be convinced,” said Al Blosshi, adding “It’s a matter of awareness, education, and formalities … it’s just a matter of time.”
ADX has been trying to get more companies in health, retail, education, petrochemicals to become a part of the index. “We thought these companies were missing in our index. We are aiming to see the sectors available on our index to reflect the real economy,” said Blooshi.
Developed market, foreign money:
More IPO’s should boost liquidity, regulation and transparency, thus attracting more foreign and regional investors, industry players feel.
“The more stocks we have, we would be able to attract more investors and more diversification. As more stocks get listed in the market, the more liquidity comes to the market, so there will be regulation, and transparency. That is how we move on from being an emerging market to a developed market,” Mousa Haddad, equity fund manager at NBAD’s asset management group. “We will take time, but all these steps are a move in right direction,” Hadded said.
Global index provider MSCI upgraded the UAE market to an emerging market from a frontier one in May. Competitor S & P also reclassified the index on September 22.
“Recent success of these IPOs (in terms of oversubscription) will encourage other private businesses to consider going public without diluting controlling interest. Post the MSCI and S & P upgrades, foreign investors looking at the UAE markets would be excited to see more choice in sectors such as retail, education and health care, should companies representing these sectors decide to go public,” said Vijay Harpalani. assistant fund manager with Al Mal Capital.
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