Marka IPO appeals remarkably to investors, preliminary indicators suggest significant oversubscription of Marka shares

April 16, 2014 3:42 pm

The first three days of the IPO of Marka, a public joint stock company under incorporation with a capital of Dhs500m, have witnessed a remarkable turnout of investors, amidst expectations of oversubscription.

Dr. Mahdi Mattar, CEO of CAPM Investment, a subsidiary of Finance House and the financial advisor and lead manager of the Marka IPO, said, “Although it is too early to know the outcome of the IPO, given that large individual and institutional investors subscribe in the latter part of the subscription period, the outcome of the first few days of the IPO suggests that the demand for the offered shares will be oversubscribed.”

Mattar said, “In addition to the high turnout expected from small investors, who usually make up the larger number of total subscribers in any IPO, it is expected that the appetite and demand from institutional investors and other prominent investors will increase over the next few days, in line with their long-term investment strategies.”

He added, “Unlike many previous IPOs, the Marka IPO has only 275 million shares on offer. This is likely to result in oversubscription, especially with the recovery of the stock markets during the last 18 months, resulting in the renewing of investors’ interest in public equity markets in general, and IPOs in particular. Marka will be the first public shareholding company that will operate in the retail and F&B sectors, two of the fastest growing sectors in the UAE and the region. We are confident that the demand for this IPO will represent a high confidence in the prospects of the company’s future growth.”

“Traditionally, banks are more willing to provide banking facilities to investors who wish to subscribe to new IPOs that adopt the concept of pro-rata allocation, a model which the Marka IPO also adopts. These facilities further contribute to enhancing investors’ opportunities to receive higher allocations of shares,” he added.

Marka PJSC is issuing a total of 500 mn shares to be subscribed by Founders and the general public. In March 2014, 151 founders subscribed to 225 million shares of Marka PJSC at Dhs1.0 per share, equivalent to 45% of the company’s capital. This paved the way for obtaining the final regulatory approvals for issuing the remaining 275 million shares (representing 55% of the company’s capital) through an IPO, which started on April 13.

From April 13 until April 24, Marka is offering 55% of shares or 275 million shares to the public at the price of Dhs1 per share plus an offering cost of 3 fils per share. Investors can subscribe to Marka shares through the selected branches of eight receiving banks and financial institutions, namely National Bank of Abu Dhabi, Union National Bank, Abu Dhabi Commercial Bank, Dubai Islamic Bank, National Bank of Fujairah, Commercial Bank International, Finance House, and the Islamic Finance House.

The minimum subscription amount is 5,000 shares at Dhs1 per share, plus an offering cost of 3 fils per share in order to allow all the retail investors to participate in the IPO. Marka will use the proceeds from the IPO primarily towards the rollout of fashion stores, restaurants and cafes in the region. It is planned that the company will allocate 50% of its capital for opening of fashion retail stores and the other 50% will be allocated for the opening of restaurants and cafes.

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