The five-year drought of initial public offerings (IPO) in the local market in the wake of the financial crisis is finally ending with a pipeline of new issues waiting to hit the market. With this, the market is turning a new phase, signalling an end to the crisis of confidence created by the 2008 bubble burst.
The dry spell was broken by the announcement of a new local company under formation by a few local businessmen and investors to enter retailing. The company, named Marka, is seeking to raise a modest $75 million to set operations rolling in the UAE’s fashion retailing and food sectors.
This was followed by the plan by Emirates Reit to float shares on Nasdaq Dubai. The real estate investment trust plans to raise at least Dh500 million, to be used for acquisitions and other investments in the rapidly recovering real estate sector.
Emaar Properties added to the excitement by hiring Morgan Stanley to advise on the sale of 25 per cent of its mall and retail business to raise up to Dh9 billion through a secondary market offering on Nasdaq Dubai and the London Stock Exchange. The issue is expected to happen around mid-June.
The latest addition to the IPO pipeline is that of freight forwarding company Able Logistics Group, which is majority-owned by a buy-out firm. This will only be the third logistics company in the region to go public after Aramex and Agility of Kuwait, both of which are listed on Dubai Financial Market (DFM).
Similarly, Abu Dhabi-based Senaat has hired HSBC and JP Morgan Chase for the sale of a part of its business, which includes the National Petroleum Construction Company, through an offering some time later this year. The issue is expected to be listed on the Abu Dhabi exchange.
It is reassuring that the announced IPO plans are from activities as varied as oil and real estate to retailing and logistics, signalling a wider spread, rather than being restricted to a more probable sector like the real estate, which has seen some genuine upswing in recent times. A public issue for retailing is particularly interesting as there have been few issues of this nature in the past.
The pick-up in market offerings has also set the ball rolling at the offices of investment banks and brokerages, which are reactivating their equity operations. There is also a poaching game going on in right earnest, with companies recruiting brokers and dealers with experience in local and regional markets.
Goldman Sachs recently announced that it was restarting its equity trading business in the region and followed up with some poaching on the rival Bank of America Merrill Lynch resources. The investment bank seeks to fill the space left vacant by Morgan Stanley and Credit Suisse, which had moved their Dubai operations to Saudi Arabia some time back to target the kingdom’s bigger market.
Merrill Lynch in turn is said to have targeted the Dubai-based operations of another leading brokerage to hunt for people to lead its reactivated equity sales and trading business.
The prospective players probably include a Russian bank, which is apparently on a hiring spree to build up a full-fledged sales, trading and research operation in Dubai as part of its ambition to grow its influence in the region.
Until some time back, all announcements related to equity trading business used to be about companies down-sizing or winding up operations. Suddenly, there is a reversal of trend and all new announcements are about companies expanding activities or building up new teams.
While the new developments do lend credibility to the emerging state of the market and the possibilities for its growth, the herd mentality of players pulling out en masse when the chips are down and embarking on no-holds-barred competition on a hint of improvement leaves a sour taste.
— The writer is a journalist based in Dubai