- Shares of Marka started trading Thursday at a premium of 77% to its 1 U.A.E. dirham ($0.27) issue price.
- Asa Fitch for The Wall Street Journal
Shares of Marka, a brand-new retail and hospitality company in the United Arab Emirates, began trading at a huge premium to their initial public offering valuation on the Dubai Financial Market Thursday, underscoring both a revival of confidence and what could be a sign that this booming desert bourse is overheating again.
Marka raised about $75 million in the IPO despite not having significant assets or operations. Investors put in bids for 36 times the shares on offer, and the stock started trading Thursday at a premium of 77% above the 1 U.A.E. dirham ($0.27) issue price.
Investors are banking on Marka’s plan to open three retail stores in the U.A.E. early next year, entering a crowded local luxury-retailing market. Marka has agreements with six brands, including a line of shoes being introduced by Portuguese soccer star Cristiano Ronaldo, to market their products across the Arab Gulf.
Investors are also banking on support Marka has received from a group of founding shareholders that includes some prominent Gulf companies and businesspeople. They contributed $61 million in start-up capital after the company’s incorporation earlier this year.
Jamal Al Hai, Marka’s chairman, said the company could spend up to 90% of its total capital – or about $123 million – on acquisitions. It is already in talks about “seven or eight” potential acquisitions, he said. Some are to be announced in October.
The fast start to trading “reflects the trust of the investors” in the company, he said.
It also may reflect the general mood in the market. The DFM was one of the world’s worst-performing markets during the global financial crisis, but has recently seen its fortunes turn in dramatic fashion. The index more than doubled last year, and is up by a further 50% so far this year.
A start-up raising money through an IPO is unusual in the Gulf, but it’s not unheard-of. Some companies that listed shares in the U.A.E. in the mid-2000s used this route, including Dana Gas, an energy firm that listed in 2005.
Traders on the DFM floor watched monitors intently Thursday as Marka shares started changing hands. Some were surprised at how high it opened. Others said they were holding off on investing until after the initial frenzy died down.
Many of the U.A.E.’s investors are individuals whose strategies involve little more than seeking quick gains based on technical charts and market rumors – speculators, basically.
Others see Marka as the vanguard of a constructive trend in the U.A.E.’s markets. It’s the first company to list on the DFM since 2009 and the first retailer ever to list in Dubai, giving investors a chance to participate in one of the U.A.E.’s most important economic sectors for the first time. Another more hotly anticipated retail IPO is coming in a week’s time: that of Emaar Malls Group, which runs some of the country’s biggest shopping centers.
Nida Musameh, one of the traders on the floor Thursday, said Marka’s lack of a track record and the market’s ups and downs had to be taken into account. He didn’t invest in the IPO, but he’s watching the stock now that it’s listed.
“Buying and selling in the market is better,” he said. “You can see the ups and downs how it will go. On the first day nobody knows, but we will see after one week.”
While Marka opened at a 77% premium to its IPO price, that had been reduced to a 59% premium by the market’s close.
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(via WSJ Blogs)
