DP World’s share price slipped more than 5% during its second day of trading to close 1 cent lower than its initial public offering (IPO) price of $1.30.
The drop left thousands of investors concerned over the short-term value of the state-controlled port operator’s stock.
Shares of DP World had ended their first day on the Dubai International Financial Exchange (DIFX) up 4.62%, rising as much as 10% in early trading, but fell 5.15% on Tuesday to end the day at $1.29.
Analysts put some of the drop down to foreign investors moving to take positions in the US and Europe following the news that the Abu Dhabi government is buying 4.9% of US bank Citigroup for $7.5 billion, signalling that the freefall in US financial stocks could be close to ending.
“There is pressure from foreigners as they are seeking to liquidate their positions to take positions in the US, Europe and other emerging markets after the positive news on Citigroup,” says Sherif Abdelkhalek, dealing room manager at Alfuttaim HC Securities.
DP World raised $4.96 billion in an IPO last week, selling 3.818 billion shares, or 23% of its equity, for $1.30 apiece. There were 15 times more bids than shares on offer.
The listing is a test for the DIFX, which has barely attracted investor interest after a 2005 start trumpeted as the birth of the Arab Hong Kong. All the other 12 companies on the exchange have shares listed elsewhere.
“The lack of liquidity in DIFX may have a negative impact on trading in shares of DP World,” said Wadah Al-Taha, head of research at brokerage company Emaar Financial Services. “Any price above US$1.50 would be a good price… this could be achieved through a dual listing.”
DP World chairman Sultan bin Sulayem has repeatedly ruled out any immediate secondary listing for the company’s stock.
By contrast, shares of Hamburg port operator HHLA, which raised 1.16 billion euros ($1.72 billion) in an IPO that was 10 times oversubscribed, have risen 6.1% since they started trading on November 2.
Despite the minor fall, DP World’s net profit is expected to rise 55% next year to $564 million, to $630 million in 2009 and as much as $923 million in 2011, according to research by Dubai-based Shuaa Capital, one of the four arranging banks. This implies the company is valued at 38 times expected 2008 earnings.
Deutsche Bank AG, Merrill Lynch & Company, Dubai Islamic Bank (DIB) and Shuaa Capital managed the share sale.
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