First Dubai IPO since financial crisis as DFM rises 20% from low
Posted on 13 October 2010 with no comments from readers
The Dubai Financial Market is up more than 20 per cent in value since the depths of July when ArabianMoney made a presentation in Vancouver tipping UAE equities, and today the first initial public offering for two years was announced.
Axiom, a division of the Dubai retailer Axiom Telecom which is 40 per cent owned by the Ruler of Dubai Sheikh Mohammed bin Rashid Al Maktoum, said it will sell up to a 35 per cent stake by the end of the year, the first IPO in Dubai since the global financial crisis.
No IPO bonanza
Shuaa Capital and Deutsche Bank are joint book-runners for the issue on the Nasdaq Dubai where IPOs are valued by a market making process. This is therefore not one of the old style IPOs in which shares were priced at AED1 and always delivered a large profit on the first day of trading.
That lead to some sensational IPOs in the Emirates in the 2005 stock market boom when Dubai was the best performing stock market in the world, a title it lost as the world’s worst performing stock market in 2006 after the crash. Some IPOs attracted a multiple of the GDP of the country.
However, a really good IPO would set the DFM on an upward path, consolidating recent gains since Ramadan. The Nasdaq Dubai is fully merged with the DFM. Then the happy prospect of refinancing some of Dubai’s debt by issuing equity would become a reality.
Global nerves
That said market insiders are nervous about the immediate outlook because the level of current global financial markets looks too high for the economic outlook. Goldman Sachs recently said that the US faced a ‘fairly bad’ or ‘very bad’ economy (click here).
All the same global stock markets are still rising on the back of a widespread belief that quantitative easing by the Fed is a one-way ticket to higher share prices. But there is little indication that QE is delivering much benefit to the US economy and certainly not in relation to the staggering amount of new debt required.
Commentators like Dr Marc Faber think the rally is due for a reality check and correction (click here). Local markets generally follow major global market shifts, so this is a cause for concern in the UAE too.
