Why a rights issue makes sense for UK-bound DP World

* username: rupertbu

Is DP World, the region’s premier ports and transport business, planning a big cash-raising exercise alongside the listing of its shares in London in a few months time?

That question has been on the minds of many in the Dubai financial community ever since DP World announced its London plans last month. Judging by a recent piece of research by HSBC, the answer is yes, the conglomerate could use the London debut to raise new funds. Furthermore, it has a range of options for liquidity enhancement in London.

The HSBC note went to clients last week, but when word of it seeped into the Dubai market on Sunday, it hit DP World shares quite hard. That was because only the top line of the research got publicised: to the effect that, due to a number of technical factors involving the proposed London listing, the bank was changing its recommendation on the shares from neutral to underweight, and was lowering its target price from US$0.50 (Dh1.83) to $0.38.