The decision by Emaar MGF to pull out of its $15 billion (Dh55bn) flotation on Indian markets is logical, but it raises some issues about the global market for IPOs in the coming months, and some questions for shareholders in Emaar, the Dubai partner in the joint venture.
Corporates and their advisers have to take notice of prevailing market conditions before they finally push the button on a flotation on the scale of MGF. But their statement will have done nothing to reassure investors. They said the reason for withdrawing the IPO was “renewed indications of a US recession and global meltdown”. Analysts have been talking about those twin threats for weeks now, but to see them cited bluntly in print is still a shock.
MGF is in good company – some 21 flotations have been pulled so far this year, with a total value of $6.3bn. It is better to wait for the best obtainable market before settling irrevocably on a flotation of such financial and symbolic importance and the advisers must be given credit for decisive action.
But I wonder whether we should have been made aware of the doubts about the proposed flotation earlier. In investors’ briefing at the end of last month, Emaar told institutions that plans were still on track to get the MGF flotation away this month.
It would have been better to have told shareholders there were some doubts about the IPO then, and warned them market conditions meant they might not get the best possible value, rather than sticking so confidently to the initial plan.
Emaar's Indian reversal doubtful