Road to IPO in UAE

Synopsis

SGP Group -25  KPMG Corporate Finance Group, Sharjah  11/7/2007

Project Summary Received from KPMG

1. Introduction
a. DFM
b. ADSM
c. DIFX
d. Profile and sectoral snapshot of listed companies in UAE
e. Announced IPOs in the next 2 years

2. Why IPO? Other options, if any

3. Key challenges
4. Time Table – amount of time it takes to list the companies
5. IPO advantages and disadvantages with critical success factors
6. Key listing requirements- ADSM, DFM, DIFX
7. Advantages and disadvantages/issues of listing on each of these exchanges
8. Other important issues
a. Regulatory framework
b. Legal
c. Financial and Legal due diligence
d. Audited financial statements and Prospective Financial Information report
9. The Complete process flow chart
10.Analyzing IPO performance in UAE.

S. P. Jain Centre Of Management, Dubai and Singapore

  Road to IPO in UAE

Post “high oil price” income waiting to

Road to IPO in UAE find suitable investment avenues.
Synopsis
Research Methodology Used
Objectives
We examine 20 UAE firms that went
1) To study the UAE Initial Public Offering
public between 2002 and 2007. Using
(IPO) process in detail. Find out the
various research methods such as indirect
weaknesses of the current IPO process
observations, structured surveys,
and suggest a concrete action plan for
interviews and experimental design we
improving the process.
studied the experimental effects of
2) To study the strengths and weaknesses independent variables on dependent
of major stock exchanges in UAE and variables chosen for our hypotheses.
compare these stock exchanges with
We used surveys and interviews as tools
other global exchanges.
for capturing customers’, investors’,
3) To develop a predictive model for issuers’, brokers’ and investment bankers’
estimating the listing gains, buy and hold responses. The opinions of key IPO
returns and normal returns. investors were captured via one-on-one
meetings or via telephonic conversations.
4) To analyze the impact of various
financial intermediaries in the IPO
process.
Data Collection, Analysis and Evaluation

Background Several studies show that co-lead

2007 is an exciting year for the UAE IPO
market. Although there have been only
three IPOs in 2007, the future of the idea
of a public offering looks extremely
bright. The reason for the researchers’
optimism is two fold. A) Path breaking
changes in regulations governing IPOs B)
managers mainly affect initial public
offering (IPO) aftermarket activities. We
investigate the role of co-managers in pre
IPO activities in UAE. Our primary data
collection and concomitant analysis focus
on the investor’s perception of an IPO in
UAE. Additionally, we have statistically

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S. P. Jain Centre Of Management, Dubai and Singapore

 Road to IPO in UAE

analyzed the gains realized from the past various other factors like number of
IPOs. Secondary data collection included receiving banks, past index returns and
collecting data for key parameters like past sectoral returns. We did not find any
number of receiving banks, listing conclusive relationship between
duration, past index returns, past sectoral oversubscription levels and the past
index returns and oversubscription levels. performance of the stock market. Given
We hypothesize that each of the above the low number of stocks prevalent in the
parameters, affects the IPO returns. The stock markets across UAE, this might
researchers categorized the returns into signal a huge appetite for new issues.
First Day Listing gains (FDLG), one year
buy and hold return (BAHR) and one year We removed the impact of the listing
normal return (OYNR). The FDLG returns returns, and concentrated on finding the
were analyzed with different independent relationship between normal stock returns
variables’ time frames. Our attempt was and the parameters listed above. As
to create a predictive model for the expected, we found the normal returns to
returns given by UAE IPOs in the past. be in line with the index and the sectoral
returns.
Conclusion
We examined the relationship between The researchers have made several
IPO returns and 5 key factors. We found recommendations, which if implemented,
that First Day Listing Gains are can bring the IPO process in UAE to a
significantly dependent on globally accepted paradigm. These
oversubscription levels and the index recommendations are backed by primary
performance over the preceding 3 as well as secondary data.
months. Sectoral returns are significant
only over a longer time horizon, indicating
that the perception of sectors
performance takes a longer time period to
reflect on the listing gains.
We also examined the relationship
between oversubscription levels and

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