Dubai: Marka’s first Initial public offering (IPO) on the Dubai Financial Market (DFM) since 2009 is witnessing a remarkable turnout of investors after three days of the issue, amid expectations of oversubscription.
The offering started on Sunday and the subscription will be closed on April 24, 2014. Marka is also the first public shareholding firm within the retail sector in the UAE to issue an IPO.
“The outcome of the first few days of the IPO suggests that the demand for the shares will be oversubscribed. Although it is too early to know the outcome of the IPO, given that large individual and institutional investors subscribe in the latter part of the subscription period,” said Mahdi Mattar, CEO of CAPM Investment and the lead manager of the IPO.
The company is planning to raise Dh275 million. Unlike many previous IPOs, the Marka IPO has only 275 million shares on offer.
As per Emirates Securities and Commodities Authority (SCA) norms, Mattar said that 45 per cent of the shares or 225 million shares needs to be subscribed by founders before the remaining 55 per cent of the shares or 275 million shares are offered to general public via the IPO, totalling 500 million shares.
In March 2014, 151 founders subscribed to 225 million shares.
“In addition to the high turnout expected from small investors, who usually make up the larger number of total subscribers in any IPO, it is expected that the appetite and demand from institutional investors and other prominent investors will increase over the next few days, in line with their long-term investment strategies,” he said.
With the recovery of the UAE stock markets, he said the issue is likely to result in oversubscription.
The Dubai index has surged 40.32 per cent while Abu Dhabi index has surged by 19.61 per cent so far this year.
The minimum subscription has been kept low at 5,000 shares in order to allow “all the retail investors to participate in the IPO.”
“Traditionally, banks are more willing to provide banking facilities to investors who wish to subscribe to new IPOs that adopt the concept of pro-rata allocation, a model which the Marka IPO also adopts. These facilities further contribute to enhancing investors’ opportunities to receive higher allocations of shares,” he said.
