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01 March 2024

IPO or not? That is the question

By Frank Kane

Emirati attendees at the Davos Forum had an open platform for their views, knowing the UAE media would pick up and run their opinions prominently. It was the perfect opportunity to air the issues they regarded as the most important in the business world today.


So it is significant that senior executives from two of the UAE’s major companies – Nakheel and Emirates airlines – took the chance to air quite serious doubts that their companies should be listed on stock exchanges, whether in Dubai or elsewhere in the world.


Sultan bin Sulayem of Nakheel told reporters that he felt under no pressure to float the huge property developer, explaining that the company was already well-capitalised. Maurice Flanagan of Emirates went further, stating an IPO could actually harm the airline by hampering the decision-making process that has made it such a global success.


These senior executives are entitled to their views, of course, and have done their duty by explaining their opinions, but nonetheless it will cause some anxiety in other sectors of the Dubai business world.


It is worrying for several groups of influential people. It must be a concern for the DIFX, which has been looking to such flotations to continue the trend set by DP World with its “kick-start” IPO last year. It will also worry the investment banks that have flocked to the DIFC in the anticipation of lucrative business as advisers to these issues.


And, arguably, it will also be of concern to the whole structure of Dubai Inc. The Emirate has been at the forefront of the great project to make the UAE the premier financial market place of the Middle East, and is generally thought to be ahead of its rivals in Qatar and Bahrain.


It has been assumed that IPOs would be the main instruments by which Dubai steered towards “international best practice” in the global economy. You might argue that, with the growth of private equity, hedge funds and sovereign wealth funds, the traditional public quoted company is becoming an anachronism, but joint stock ownership is still the criterion by which the Western capitalist world judges these things. What some might take to be “hampering” operations is regarded in other parts of the business environment as good corporate governance procedure, to which the UAE is firmly committed.


It was also believed flotation of assets that are ultimately government-owned was one of the main planks of the policy of diversification away from Dubai’s dwindling dependence on energy revenue, with IPO revenues providing the resources for the non-energy side of the economy.

If companies like Nakheel and Emirates are no longer part of this plan, it is a significant change.


Of course, there are alternatives. Dubai’s government-owned corporations, who mostly have good credit ratings in the international debt markets, can use this avenue to raise funds. And, from what the investment bankers say, there are a host of private, family-run corporations that are preparing the way for market flotation. These might be enough to keep the DIFX and the investment bankers of the DIFC happy for a while.


In today’s fluid business world it is wise to keep all options open. But it is also advisable to state long-term objectives clearly. If there are doubts about government IPOs in such influential centres of UAE business life, perhaps it is time for a more open debate on these vital issues.