Shehab Gargash says inflexible regulations are restricting number of firms on IPO track
Overzealous regulations are restricting more UAE companies from launching on the stock market, the influential CEO of financial services firm Daman Investments, Shehab Gargash, said.
“I think it’s a little too restrictive today. I frankly think smaller companies should have access to primary markets; they don’t have that much access,” Gargash said.
“Less profitable companies should have access as long as you do proper declarations and the proper declarations.
“I think also the ability to value should be more flexible than it is today. The laws governing IPOs today are a little too rigid and thus tend to limit how many companies are really groomed and beautified to go to market.
“This economy is broad enough that it can be treated like an adult economy rather than a child economy. We tend to be a little more over caring when we vet our IPO candidates. I think we should let the market vet it and we should give a little more leeway in terms of what constitutes a good IPO-able company.”
Arabian Business reported in March that more than half of all UAE-based family businesses that began preparing for a public float were turned off by the intense scrutiny and corporate structure of a listed company, according to KPMG.
Small to medium-sized businesses (SMEs) are most likely to find it difficult to conform to regulations attached to IPOs.
However, Nasdaq Dubai is expected to launch the Middle East’s first equity market for SMEs as early as this year.
Gargash said it was difficult to quantify how many companies would go ahead with an IPO is the rules were relaxed.
“Some are holding back simply because of the market situation, some are holding back because they would rather wait for a market that would pay a higher premium, some are holding back because, simply, they don’t meet the rigid requirements,” he said.
“I think a lot more companies, especially medium and upper-medium sized companies are being held back because we’re not a very friendly jurisdiction to IPOs.”