The 2nd Middle East IPO Summit 2007 which opened yesterday (Monday 26th March) at the Madinat Jumeirah, Mina A’Salam in Dubai sought to highlight the solid underlying economic conditions for initial public offerings (IPO) in 2007. During a dedicated case study, Tamweel PJSC, the UAE-based Islamic home finance company, shared insight regarding its successful IPO launch last year. Not only was it 500 times oversubscribed but it reached record bidding of AED 270 billion in just two weeks.
Presenting an overview of their IPO, Vivek Rao, Head of Finance at Tamweel commented, “Issuers should strive to obtain optimal valuations from regulatory authorities resulting in adequate capitalisation and at the same time, providing an attractive purchase for potential investors.”
A unique allocation policy was applied for the Tamweel IPO, which initially looked to raise AED 550 million worth of shares, representing 55 per cent of Tamweel's capital, offered at a nominal value of AED 1. The new allocation policy allowed both small and large investors to participate equitably in Tamweel's IPO.
The offered shares were divided into three slices. The first was for a maximum of 137,500,000 shares allocated equally among UAE National subscribers with a maximum allotment of 20,000 shares per subscriber. The second was capped at 297,521,000 shares which was distributed to UAE Nationals and UAE based institutions on a pro-rata basis.
The third part had been introduced for both UAE expatriate investors and other GCC nationals. The size of this was 114,979,000 shares and the allocation will also be on a pro-rata basis.
According to senior financial analysts working on the transaction, Tamweel's excellent growth potential and the equitable allocation policy, was instrumental to its success. In addition The National Investor (TNI), which acted as the financial advisor, lead manager, and book runner for the IPO, indicated its commitment to developing the capital markets in the region by launching innovative and ground-breaking deals.
In summary, Rao presented some of the procedures necessary for a successful IPO launch. “Careful planning and clearly defined objectives are key. Select the correct IPO ‘team’ and prepare a plan containing a thorough industry SWOT analysis supporting your market position. Agree on a realistic market valuation, structure the legal and compliance issues and choose an appropriate time to launch, noting market liquidity and sentiment.”
Other highlights on day one of the event where two keynote presentations delivered by Henry Azzam, Chairman, Dubai International Financial Exchange and Dr. Habib Al Mulla, Chairman, Dubai Financial Services Authority (DFSA), respectively. Azzam talked about the prospects for future regional market growth and Al Mulla underlined the role of the DFSA regarding disclosure, transparency and corporate governance.
Two highlights on today’s agenda (Tuesday 27th March) are the panel discussion on ‘Trading Practices Of IPOs In The Middle East’ and an in-depth view of ‘Determining The IPO Price’.
