No one knows for Shuaa

As soon as Iyad Duwaji stepped up to the podium of a cramped and hastily organised conference room in Dubai’s Emirates Towers, there were signs that something wasn’t quite right. “I believe in free speech”, the CEO of investment bank Shuaa Capital announced to the assembled press corps.

Shivers ran down our spines, because let’s be honest, we all knew the real reason for being summoned to the aptly chosen 13th floor at 1pm on the morning of February 11, and it wasn’t to receive an early Valentine’s card. As one person said, “this kind of story never happens here.”

Two articles written by the Paris-based Trends magazine alleged that Shuaa had “manipulated” the price of shares it purchased in Kuwaiti business Al Ahlia. This has brought Shuaa under the triple regulatory spotlight of the Kuwaiti Stock Exchange, the Emirates Securities & Commodities Authority (ESCA) and the Dubai Financial Services Authority (DFSA), and of course, the media.

As our exclusive story on page 15 shows, DFSA chairman Dr Habib Al Mulla denies there is any form of investigation taking place, instead referring to the probe as “information gathering”. There is, however a very thin line between reading through and investigating a company’s previous transactions. I hope this will become clearer in time.

“This and the Gulf News piece has caused huge problems over the past few days,” Duwaji admitted. Big enough problems for the business to announce that it is seeking legal action against the Trends publishers calling both pieces “sensational” and “misrepresenting various facts and events”.

It is not just Trends, however, that is writing about this issue. Do a simple search online and you will see a whole host of allegations from alleged “crashing profits” to alleged staff quitting amid murmurs of “ethical hanky-panky”, according to one site. The CEO on the other hand denies that anything is wrong. Duwaji also refused to deny that Shuaa had paid one price for shares (around 410 fils) but that it had then made a public announcement of 480 fils a share.

He did, however, say that no party had “unduly benefited” as a result of the deal. Another cloudy issue also raised in our news section this week is that of the previously hyped Arab Asia Gateway Fund between Forsyth Partners and Shuaa Asset Management, a subsidiary of Shuaa Capital regulated (and “investigated”) by Dr Al Mulla’s DFSA. Launched with a huge amount of pomp and ceremony and promising to allow both institutional and retail investors the opportunity to access the two fastest growing economies in the world from a single product — a “first” for the region — we all thought this was great news.

In reality Arabian Business has learnt that nothing actually came of the deal and it petered out without anyone noticing. After two days of calls to Forsyth it released a statement for our eyes only claiming that the joint venture was “postponed due to the changing stock market environment” and denied its cancellation had anything to do with Shuaa’s involvement. The coming months will allow us to see if that is the case. On the flipside, however, the media, including myself, can have a positive influence on all this, by showing that the three regulatory boards mean business — whether the allegations made by Trends turn out to be of substance or not. In the light of ESCA fining four companies for late results filing, this could prove to be true.

Despite the fact that Shuaa claims to have approached ESCA voluntarily it is a strong signal to the rest of the world that the UAE’s regulatory framework can work. This is vital in attracting more foreign institutional investors to the region — something that has to happen if local markets are to mature and progress in the long-term. Not that Duwaji went into much detail at last week’s conference. The only issue he covered in any depth was the company’s success, how it was self-regulating before the aforementioned regulators stepped in, and how the majority of the businesses in which it has invested have all gone to IPO and now trade “well above” their normal issue price.

The issue of legal action against Trends, however, remains unclear, with no response as to what, where and how the proceedings will be and take place. If it is libel, Shuaa may have a chance in traditionally sympathetic French courts, but this remains hazy until it decides to arrange another press conference — hopefully, one that is better timed, and with more information available to share. The fact, however, that the conference was held at all — albeit, as it turned out, perhaps a rather ill judged move by Shuaa — is a good sign.

The Middle Eastern and global business community will be keeping a close eye on this story, and so hopefully will potential investors around the world.

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