TAKING STOCK: UAE's IPOs: More Talk Than Action - WSJ.com

If the United Arab Emirates' initial public offering pipeline were anything like the crude oil ones that pump life into the country's economy then its equity markets would be dancing to a merry old tune.

But, sadly, it isn't and they aren't.

In fact, such share sales around these parts are now about as common as snowfall. So recent whispers of an imminent return of IPO activity in the emirates certainly made this writer sit up and take notice. After all, the last IPO to get off the ground in the U.A.E. took place about two years ago; almost an eternity. Back then, crude was parked at about $130 per barrel and the world was still happily accepting Dubai's bouncy checks.

But, just last month, the chief executive of Shuaa Capital, the largest investment bank in the U.A.E., said his team was working with an unnamed Abu Dhabi-based company in an effort to bring it to market later this year. Then, low and behold, a few days later, local media reported that Emirates NBD Capital was advising on three different IPOs for this year. Could it be the U.A.E. is standing on the cusp of an IPO bonanza?

Just hold up one darn second. The common thread in these reports was a lack of any firm details about the planned share sales. There were no company names, nothing on the size of issues; heck, not even rough dates were supplied.

The promotion of an 'IPO market' that's more fantasy than fact shouldn't surprise anyone though. Investment banks continue to scramble for any crumbs of activity that will help prop up sagging fee and commission income. Suggestions of an active IPO revival might very well be aimed at inspiring firms to consider coming to market.

But talk is cheap, and the cold reality of selling and listing shares here at the moment is a scary proposition. Conditions for IPOs are far from ripe. In fact, the current environment is probably about as lousy as it can get. Dubai's equity benchmark, the DFM Index, has slumped 11% over the past month alone, while neighbor Abu Dhabi has given up about 10%. With no immediate cure in sight for Europe's festering credit problems, and worries about global economic growth escalating by the day, further downside for stocks can't be ruled out in the coming months.

The fear, nay embarrassment, of a company's shares sinking below the issue price on market debut is a terror that should keep even the bravest of potential IPO-ers at home. Anyway, it's debatable whether there would be sufficient investor appetite to soak up any new share issues over the coming months. The blistering hot summers here tend to drive all and sundry to cooler climes and, with the holy month of Ramadan just around the corner, liquidity will fast become a precious commodity.

Selling and listing shares can and should be a profitable route for companies to pursue. It's also a great provider of depth and liquidity for local exchanges. But timing is everything for an IPO and there are precious few signs that this time is now in the U.A.E.


(Tim Falconer is currently News Editor, Middle East for Zawya Dow Jones. He has been a financial news reporter since 1999. He has reported on equity, money and commodity markets for Dow Jones Newswires in Wellington, London and Dubai. He can be reached at +971 04 446 1690 or by email: tim.falconer@dowjones.com)