Dubai’s Major Tech IPO Signifies Successful Turnaround Initiated in 2021

The Middle Eastern division of German food delivery giant Delivery Hero SE is set to begin trading in Dubai next week, signaling a notable recovery for the city’s stock market in recent years.

Talabat’s initial public offering, valued at $2 billion, is the largest IPO in the Middle East for this year and the biggest technology listing globally. This could usher in a renewed emphasis on private listings within the emirate.

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“Talabat will certainly not be an isolated incident,” remarked Prasad Chari, the group head of equity capital markets at Emirates NBD, the bank playing a key role in the IPO. He noted that they are in “active discussions” with a variety of issuers and sponsors from around the globe to explore the opportunity for listings on Dubai’s stock exchange.

Since Dubai launched its IPO campaign in late 2021, Emirates NBD has emerged as one of the top advisers for new share offerings in the city. The government’s privatization efforts have generated over $8 billion, significantly enhancing the total market capitalization of publicly traded companies.

Alongside a similar surge of activity in neighboring Abu Dhabi, the United Arab Emirates is on track to be the most active location for listings across the Europe, Middle East, and Africa region for the third consecutive year, as per Bloomberg’s compiled data.

This represents a remarkable transformation for Dubai compared to just a few years ago.

In 2021, the market experienced a notable decline in new share offerings, compounded by a series of delistings that further eroded investor confidence. During this period, Abu Dhabi and Riyadh were already reaping the benefits of their privatization efforts, attracting billions and repositioning the region as a key destination for IPOs.

Dubai’s fortunes began to change in November of the same year when the deputy ruler announced plans to float 10 state-owned enterprises. Simultaneously, the stock exchange underwent a substantial overhaul, paired with numerous initiatives aimed at encouraging private companies to go public.

These initiatives aligned with a post-pandemic recovery in Dubai’s economy, bolstered by the World Expo and relaxed travel restrictions that revitalized the tourism sector. An influx of international expatriates has further contributed to this recovery.

Talabat’s market debut will be closely monitored by several other companies, including the operator of the classifieds site Dubizzle, the owner of the Al Fakher shisha brand, and hotel operator FIVE Holdings, all of which are considering share offerings.

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This debut may act as a barometer for government-owned entities preparing for their own listings.

Following a period marked by real estate delistings amid a declining property market, the government is now looking to capitalize on the current rebound — with Dubai Holding exploring the possibility of merging two property portfolios into real estate investment trusts for listing, as reported by Bloomberg News.

Further sell-offs are also anticipated to follow the IPO trend, according to Chari, which would enhance market liquidity.

Meanwhile, the benchmark Dubai Financial Market General Index has surged nearly 20% this year, significantly outperforming its counterparts in Abu Dhabi and Saudi Arabia.

However, as Dubai stocks approach their highest levels since 2014, this also results in elevated price valuations. Analysts have cautioned that the index may be “more susceptible to negative developments than to further positive news.”

“A significant risk for Dubai’s economy is a slowdown in global growth, which could reduce demand for key sectors dependent on external markets,” commented Monica Malik, chief economist at Abu Dhabi Commercial Bank. “Nonetheless, ongoing investment plans should help support the economy, and Dubai’s fiscal situation has significantly improved.”

© 2024 Bloomberg

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