Investors Flock to Dubai IPO in Bet on Biggest Mall

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After seeing a newspaper ad for the share sale by Emaar Malls Group, Haidar Al Hadrani jumped in his car and drove the 120 kilometers (75 miles) from Abu Dhabi to Dubai to register as an investor at the stock exchange.
 
“I have never invested before,” Al Hadrani, a 28-year-old engineer who works for Abu Dhabi National Oil Co., said as he filled in application forms at the Dubai Financial Market. “Everybody worries about losing money, but as long as I don’t invest too much I am not worried about it.”
 
Individual investors like Al Hadrani can together buy as much as 30 percent of the shares in the initial public offering, with the rest earmarked for institutions. Demand for the United Arab Emirates’ biggest IPO since 2007 is high: Emaar received orders for all the stock allocated to institutional investors two days after the sale began, it said on Sept. 16.
 
The company is seeking as much as $1.58 billion from the IPO on the second-best performing bourse this year, after the benchmark DFM General Index climbed 52 percent. Investors will own shares in the company behind Dubai Mall, the world’s largest shopping center, known for high-end outlets, inside aquarium and proximity to Burj Khalifa, the world’s tallest building.
 
The share sale will probably price at the high end of the 2.5 dirham-to-2.9 dirham range, according to a term sheet seen by Bloomberg. Investors subscribing to the IPO below 2.9 dirhams risk missing out, according to a message investors received from banks on the deal.
 
Hour Queues
 
Al Hadrani and hundreds like him queued for hours at the DFM to register as investors and apply for stock. The emirate hasn’t seen such a large turnout by individual investors since before the local stock market fell 72 percent in 2008.
 
“For the first two or three days, there were long queues at the exchange to get National Investor Numbers so they could subscribe to the IPO,” Nayal Khan, head of institutional sales and trading at Naeem Holding brokerage in Dubai, said by phone. “It reminds me of 2006.”
 
Investor appetite for Dubai was near its peak at that time in anticipation of a wave of IPOs by Dubai-based companies. The bonanza of share sales failed to materialize after some high-profile IPOs misfired and the financial crisis brought the emirate close to default within three years.
 
DP World
 
Ports operator DP World Ltd. (DPW) raised $4.96 billion from investors in 2007 in a share sale that was 15 times oversubscribed. The stock tumbled after trading started, prompting the company to consolidate its shares in 2011. Depa Ltd. (DEPA), which fits out building interiors, slumped 61 percent since selling stock on Nasdaq Dubai in 2008.
 
Those experiences, coupled with the financial crisis, led to a decline in trading that deterred companies from holding IPOs. Now, with the economy accelerating because of a boom in trading and tourism, Dubai companies are once again planning share sales to take advantage of renewed investor appetite.
 
“This seems like a good opportunity to start getting into the market,” said Rashid Mohammed, a 26-year old graduate who said he was registering to invest for the first time. “Emaar is a big company and everyone knows Dubai Mall. I have a little money and maybe I can make a lot more.”
 
Trading reached 12 billion shares in July, up from 1.4 billion in July 2010, as Dubai recovered from a slump in real estate prices and as government-controlled companies restructured billions of dollars of debt. The DFM was the best-performing market in the world last year, when the U.A.E.’s exchanges were upgraded to emerging market status by index provider MSCI Inc.
 
Ease Ownership
 
Queuing for registration aside, some financial institutions are easing investors’ path to share ownership. Individual investors are being feted by banks with overdrafts and the option of subscribing through automated teller machines. Mashreqbank PSC (MASQ), Dubai’s third-largest lender, is offering account holders loans of about $2,700 to order stock.
 
While Al Hadrani is investing for the first time, the boom and prospect of gains once trading starts is also drawing more experienced hands back to the fray. Since Emaar began the offer period for the IPO of its malls unit, 2,868 new investors registered with the exchange, the DFM said in an e-mailed response to questions, while 1,912 updated their accounts.
 
Some analysts say individual investors are relying too much on sentiment and not putting enough analysis into stocks.
 
“Retail investors don’t analyze companies,” Naeem’s Khan said. “All they see here is Emaar, the jewel in Dubai’s crown, so why not invest since there is all that euphoria around this offering?”
 
Written By Matthew Martin and Sarmad Khan. Originally published on bloomberg.com

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