Page 101 - ALEF EDUCATION PR REPORT NOVEMBER 2024

Abu Dhabi government entities are the major shareholders in 10 of the companies and Dubai state
entities in five.

The Dubai Electricity and Water (Dewa) offering was the largest UAE flotation in this period, raising
$6.1 billion, while the IPOs of three Adnoc subsidiaries raised a total of $4.4 billion.

The top nine performers are majority owned by Dubai or Abu Dhabi.

“Government backing is very important,” says Ahmed Kamal, portfolio manager at Azimut Middle
East in Dubai. “It solidifies the investment case and gives investors confidence that the
management guidance on the company’s earnings outlook is achievable.”

Yet government-run businesses tend to have relatively small free floats, ranging from 5 to 25
percent.

Often, so-called cornerstone investors – typically, other government-related or federal entities – buy
a sizeable portion of the shares sold in these IPOs, so the number of shares available for trading is
lower than it appears.
In May, Adnoc Drilling sold a further $935 million of shares, 5.5 percent of its stock, in an
accelerated book building.

The sale, priced at AED3.90, raised the company’s free float to 16.5 percent. This led it to be
accepted for inclusion in MSCI’s indexes, important benchmarks for international investors.

Adnoc Drilling’s stock ended Friday at AED5.24, taking its gains since listing to 128 percent.

Adnoc Logistics & Services, which went public in 2023, has been the top performer since its IPO –
but does not offer the same access to outside investors.

“The free float increase has had a very positive impact on Adnoc Drilling’s stock performance,” says
Kamal.

Adnoc Logistics & Services and Adnoc Gas are high-quality companies and deserve to be included
in the MSCI and FTSE indexes, he says, but their free floats do not meet the threshold.
Not all the IPOs have fared so well. Four of the 21 companies ended trading on November 15 below
their IPO price. Alef Education was down 13 percent, Al Ansari Financial Services was down 5
percent and ADNH Catering was down 1 percent.

Al Yah Satellite Communications Co (Yahsat) had fallen 24 percent when it delisted on September
30 following its acquisition by Bayanat AI, another Abu Dhabi government-run company that has
since been renamed Space42.

“The post-IPO performance has been mixed and depends on many variables,” says Kamal. “The
company’s individual fundamentals are key but also of huge importance is the way the bookrunners
determine the IPO share allocation."

If investors receive too small an allocation, Kamal explains, there is little incentive for them to
expand their holdings at a higher price after listing.

https://www.agbi.com/analysis/markets/2024/11/government-backed-uae-companies-share-
price-ipos-dubai-abu-dhabi/