The art of investment

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OPTIMISTIC: Gargash is convinced that the region will continue to represent an attractive prospect for investors.

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LISTING: It was hoped that the Nanodynamics share sale would attract institutional investor interest. Instead, the US tech company pulled the offering.

Andrew White meets Shehab Gargash, CEO of financial services giant Daman Investments, and one of the key figures behind Dubai's emergence as the region's premier financial centre.

Sat beneath one of the huge paintings that adorn his office high above Sheikh Zayed Road, Shehab Gargash is in a contemplative mood. Briefly, stocks and shares aren't on his mind, although the digression cannot last for long.

"The Middle East arts scene has evolved tremendously over the last few years," he sighs, casting his eye around the room, and over a bookcase stuffed with books on everything from Ghandi to Reagan, via Thomas Friedman. "It is becoming a serious passion, but then with art it is more difficult to make the right investment.

"With art, I would pick up something that I love simply because I love it, even though I know it won't go anywhere as far as money is concerned," he insists. "By contrast, when you manage a fund you really don't hate anything: you like something, and you like something else less. With art there's a lot of emotion and subjectivity in what you see painted.

The past week may have proved an exception to this rule. It has been an emotional seven days for the CEO of financial services firm Daman Investments, and he is urging observers to maintain their subjectivity with regards to an episode that has shaken both Daman and the Dubai International Financial Centre (DIFC).

At the beginning of February, Daman and its US strategic partner, Global Crown Capital, announced that they would be co-lead managers on the IPO of global alternative energy and clean technology company Nanodynamics, Inc.

Nanodynamics intended to be the first US company to list on the Dubai International Financial Exchange (DIFX), and it was hoped the US$11 shares would attract US institutional investors as well as regional Middle East institutions and accredited investors. One day prior to the placement, however, and the bourse announced that Nanodynamics had decided to pull the plug on its listing - a move that has attracted murmurings across East and West.

"We had a very promising and interesting IPO coming together, but as we approached our deadline we were not 100% comfortable that the paperwork was in order, and was adequate for the trading to commence and the protection of the investors," explains Gargash carefully.

"We were listed in anticipation of trading, and when we decided not to trade we informed the market that we would hold back on the trading, so we did not trade on the day we were supposed to," he continues.

We had a couple of days of deliberations with the DIFX and the Dubai Financial Services Authority, subsequent to which the company decided it was in the best interests of everybody to withdraw its listing from the DIFX. We feel that this was the most logical and the most adequate step to take in order to protect the interests of Daman, the company, the investors and the market."

While refusing to go into specific details, Gargash insists that the "unsatisfactory paperwork" which killed the listing was not provided by Nanodynamics, but by some of the "several parties" close to the deal.

"We had a role as sponsor, and when you are sponsor the responsibility is to make sure that everything goes smoothly," he asserts. "It is within that capacity, in doing our reviews of the paperwork, of the submissions, of the representations, that we asked for some clarifications and we did not get the clarifications that we wanted to get."

Gargash insists that relations between Daman and Nanodynamics remain cordial, and reveals that while the financial details of the transaction remain confidential, Daman received its fees in full, and is not in dispute with the US company.

"We fully expect the company some time in the future to go public, and we would very seriously consider taking them back," he smiles. "We have a very good relationship with Nanodynamics, and we continue to have a conversation with them.

Such positive sentiments aside, Gargash accepts that the delisting of Nanodynamics shares has attracted unwelcome headlines across the Gulf and on Wall Street.

"It's certainly a disappointment - we did want to see the IPO succeed, the listing proceed, and people trading the shares today as we speak," he says. "At first look a lot of people will question what happened, and why it happened, but I think that when it's explained people will move on.

"For the company, for Daman and for the market, the paramount concern was that shareholders' rights were preserved and protected," he continues. "The company can always come back to market to list, the market can always have other listings - we will move on and get one deal after another.

"The integrity of the whole proposition was salvaged by a very difficult decision," he admits. "In hindsight I think it was the right decision, but on the spot it was a very hard one to take, especially with the clock ticking.

The fallout from the Nanodynamics episode is difficult to ascertain, particularly at this early stage. However, Gargash is hoping that when the dust settles, investor confidence in the DIFX will remain robust - it should, he insists, take more to scare off the international institutional interest that the exchange has invited over the last 12 months.

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