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Cheerful mood spurs IPO wave

The success of several initial public offerings (IPOs) in the Gulf during the past couple of years has given a new impetus to the stock market culture in the region, particularly the UAE. "While the success of some major players on the UAE stock markets is a key factor influencing several companies to seriously consider flotation, increased competitions from global majors are prompting them to expand and grow further. This requires additional investments, and they see public offerings as a better option than resorting to bank financing. As a result, several major corporations sees IPOs as the vital move to consolidate their growth," sources at the stock broking and investment banking fraternity point out.

According to analysts, the total value of new flotations in the market is expected to be around $1.1 billion by the end of the year. "Many companies are increasingly realising that an IPO is the most logical and strategic method of ensuring both the ability of the company to expand its business and enhance the quality of its service offering. Taking on more debt is not necessarily the answer to company expansion," says Mohammed Ali Al Hashimi, CEO of Amlak Finance PJSC.

The all-round boom in stock market culture also has brought to the fore the significance of increased transparency and improved standards of corporate governance and accountability. "Seeing how well these listed companies are doing should serve to encourage more government and family-held businesses to enter the market. The presence of such large government entities and conglomerates on the market will bring much liquidity and in turn spur even more companies onto the market," says Al Hashimi.

Shehab M Gargash, Director of Daman Securities, Dubai, said the unprecedented growth in the secondary market until the end of September underscored the rising optimism of investors in equities. The primary market trends are very much in favour of more IPOs. “There is big demand for IPOs from the investing public. The recent successful public issues such as Amlak, Finance House and and Arabtech hints at the big appetite for good quality issues,” said an investment banker.

Mohammed Ali Yassin, director general of Emirates Securities and Commodities Authority, said UAE's IPO market received a boost over the past few months from increased stock market transactions coupled with a rise in investments from foreign and national investors.

Gargash sees the successful launch of several Sukuks and rights issues as evidence of the emerging equity culture and the growing appetite for stock market investments. "Investors are waiting for more companies to offer shares. The big wave of IPOs should come from the family-owned businesses and it looks like that many of them are not quiet ready yet for flotation,” Gargash said.