Dubai firm mulls listing 30% in unit M’Sharie on Nasdaq Dubai, trade the shares on DFM.
Dubai Investments is considering listing a 30 percent stake in unit M’Sharie on Nasdaq Dubai and trading the shares on the Dubai Financial Market to circumvent a regulatory rule, the chief executive officer said. Dubai Investments, which owns stakes in more than 40 companies, is seeking to sell shares in private equity unit M’Sharie in an initial public offering by the end of June 2011, Khalid Bin Kalban said. The company wants to trade the shares on the DFM because of higher liquidity, he said. DFM requires companies to sell a minimum 55 percent stake and Nasdaq Dubai has a 25 percent minimum listing rule.
This is “the only option we have because of the regulations’ shortcomings,” Bin Kalban, 52, said in an interview in Dubai. “We have assurances after meetings with DFM and Nasdaq Dubai that it’s possible.”
Dubai Financial Market, the only Gulf Arab stock market to sell shares to the public, in December offered $121 million to buy Nasdaq Dubai as it aims to boost liquidity. Nasdaq Dubai, the Gulf’s first international exchange that allows listings in U.A.E. dirhams and dollars, has been struggling to attract trading volumes since its inception in September 2005.
“I can’t see how any company can sell shares on one exchange and trade on another without fulfilling the usual requirements,” said Ayman Heikal, a legal consultant at the Abu Dhabi-based Emirates Securities & Commodities Authority, the regulator known as SCA. “The regulator of each exchange will need to ensure the laws are followed.”
Dubai Investments in December 2008 delayed a plan to sell as much as 40 percent in M’Sharie. It is “too early” to determine the company’s value and the last valuation priced it at around 1.5 billion dirhams ($408 million), Bin Kalban said.
The United Arab Emirates is home to three exchanges, including one in Abu Dhabi. The Abu Dhabi Securities Market and the Dubai Financial Market are regulated by the SCA, while Nasdaq Dubai is regulated by the Dubai Financial Services Authority.
The SCA requires companies to sell a minimum 55 percent stake to the public. That may change once the U.A.E. passes a law allowing companies to float as little as 30 percent during an IPO, Mahmoud Ibrahim Al-Mahmoud, a member of the board of the government securities regulator said in April 2008.
“Such a move would give the stock market a better representation of the economy and would widen the net, bringing in more family-owned businesses,” said Kamran Butt, Dubai-based head of Middle East equity research at Credit Suisse Group AG.
Dubai Investments may hire Deutsche Bank AG and The National Investor or Al Mal Capital PSC and Gulf International Bank BSC to advise on the sale. The investment firm doesn’t need to raise funds this year as “liquidity is very healthy,” Bin Kalban said.
M’Sharie will list on the DFM if it doesn’t get approval to trade the shares on the exchange after the IPO, he said. Dubai Investments in September 2008 said it sold a 40 percent stake in M’Sharie for 400 million dirhams.
Dubai Investments shares fell 1.7 percent to 76 fils at the close on Monday. The shares have tumbled 24 percent this year, compared with a 16 percent drop in the DFM General Index.