The past few months have seen the Dubai government sell stakes in two of its entities - Dubai Taxi Company (DTC) and Parkin, which oversees public parking operations in the emirate. These IPOs have not been out of the blue as they represent a long-term plan set in motion in 2021.

Back then, the government of Dubai had said it intended to list 10 state-owned companies to boost the size of its financial market as well as its position as the UAE’s capital for financial services, targeting a value of AED3 trillion ($8.16 billion).

A few months later, in April 2022, the first of these companies went public. Dubai Electricity and Water Authority (DEWA) was listed on the Dubai Financial Market in a hugely successful $6.1 billion IPO - “the largest in the UAE and the largest utility IPO globally since 2008” as per the company.

DEWA said at the time the share sale was aimed at boosting trading liquidity in the stock market.

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According to an FT report from 2022, the IPO was “part of a plan to revive Dubai’s moribund capital markets with a series of part-privatisations, as well as the expansion of market making and support for technology firms seeking to list on the Dubai Financial Market.”

The report also noted that “the government wanted to boost its domestic markets after falling behind regional competitors Abu Dhabi and Riyadh, where volume and valuations have soared in recent years.”

Not long after, Dubai business park operator TECOM Group raised $463 million through its IPO, followed by the government’s toll operator Salik raising over $1 billion. Then came Empower’s (Emirates Central Cooling Systems Corporation) turn - its IPO raised $724 million.

The government appeared to take a breather after this, with no IPOs for a year. But then at the end of 2023, DTC’s flotation made headlines - it had received over $41 billion in investor orders for its $315 million initial public offering, a record for the city.

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A Reuters report said the sale was part of a broader privatisation programme “to boost stock market activity, repay debt and deepen capital markets.”

And just this month, Parkin received a whopping $71 billion of orders for its $429 million Dubai IPO. This means six of the 10 intended state-owned companies have been listed, with four to go.

Market watchers have said these could include energy company ENOC and airport services provider dnata.

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The FT report, though from 2022, said that it could even be “Emirates Group, which owns the airline and a range of other airport and travel services, or even the sale of shares in the international airline itself, as travel demand has recovered.”

Speaking to Business Recorder, Mazen Salhab, Chief Market Strategist MENA, BDSwiss, said: “I doubt that Emirates will do the same, at least right now, when its financial situation is very strong, and they have a very strong revenue in 2023. And I don’t think they are planning to make an IPO, maybe at least for the next five years.”

He also said Dubai is seeking to attract investors through these IPOs.

He noted that in the aftermath of the COVID pandemic, Dubai has been attracting millions of investors and people who want to not just visit but live there.

“People are not coming as tourists or to stay short term. They are coming to stay in Dubai, to live here and to invest here.

“So Dubai wants to diversify the economy. It wants to give these people investment opportunities that not only focus on real estate, for example, because real estate is booming, but it wants to make sure that there is diversification and there’s a financial market as well.”

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In an interview with Investment Monitor in January 2024, John Wilkinson, head of emerging markets equity capital markets and managing director at Goldman Sachs, noted that “the Dubai equity market, historically, was a relatively small collection of companies when compared to other global exchanges. But it’s going to meaningfully diversify and grow.”

“Both of those are important in terms of giving the market more critical mass, more liquidity, and a bigger representation in the major global indices like MSCI Emerging Markets,” he said. “The push to list companies was meant to stimulate participation from UAE-based private companies, family-owned businesses, and potentially private equity-owned businesses.”

It was recently reported that companies in Dubai raised $9.4 billion through selling shares on the Dubai bourse in the past three years, amid strong investor interest. Aggregate investor demand for those listings reached more than Dh1 trillion, according to the Dubai Securities and Exchange Higher Committee.

Looking to the future, Wilkinson said: “Over the next 12 to 18 months, there will be a broadening of the supply and diversification of the types of businesses that come to market beyond the initial IPO boom that came from the government.

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Meanwhile, Salhab said: “The beginning of 2024 seems promising. Our expectation is that we’re going to have more IPOs in 2024, mainly in the first half, and then if the interest rate goes lower in the second half of this year, then we may have more.”

Copyright Business Recorder, 2024


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