Bookbuilding heralds new era for Gulf IPOs

Gulf Arab companies seeking a listing on regional exchanges are seen opting for bookbuilding rather than floating shares at a fixed price, to squeeze out more value as initial public offerings (IPOs) pick up.

Bookbuilding is relatively untested in the Gulf but, with at least three new issues in the spotlight, it is becoming a preferred option. Regional regulators are also coming on board.

"The book-build process for IPOs in the Gulf is here to stay," Nasdaq Dubai Chief Executive Officer Jeffrey Singer said at a conference in Abu Dhabi on October 25.

"Companies won't leave as much value on the table as in the past. Family companies will float more through the book-build process ... we're entering a new era for capital markets in the Gulf."

Floating shares at a fixed nominal price has sometimes created a mismatch between value and pricing in the region.

The Gulf IPO market remained shut for months as trading on regional exchanges dwindled and volatility prevailed.

The first IPO of international significance from the region in nearly two years, of Omani telecoms company Nawras in October, was the first via bookbuilding in the sultanate.

Its shares surged 5.4 per cent on its market debut on Monday, as retail investors tried to buy into the stock after showing little interest during the subscription period due to lack of familiarity with the bookbuilding process.

Nawras Chief Executive Ross Cormack told Reuters that retail investors made up just 27 per cent of subscribers to the IPO while institutions covered the rest. Usually retail investors are more active in the region than institutions.

"The process gave us the opportunity to meet a huge number of investors face to face," Cormack said."The issue is getting people used to the new approach to doing an IPO."

Other IPOs expected this year include United Arab Emirates retailer Axiom Telecom and Aluminium Bahrain (Alba), a unit of sovereign wealth fund Mumtalakat, both through a bookbuild.

"It will take some getting used to but the trend is positive and one that keeps us in tandem with global markets. It's a more transparent and efficient process," Abdul Kadir Hussain, chief executive of asset manager Mashreq Capital, said.

"The issue about institutional investors is key, not just for equity markets but also debt markets. There is a need for more professionally managed money flowing into the region."

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