The secondary market for private companies will give more liquidity and pave the way for more companies to come out with an Initial Public Offering ( IPO) on the stock market, industry participants said on Tuesday.
His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, on Tuesday launched the second market in the UAE for private companies, which will be operational in a few months.
The share trading of private companies will be available for investors and the share price will ascertained depending on the company financials and supply and demand factors, analysts said.
“It’s a market for unlisted private small and midcap where they can have their shares traded and there is a price discovery mechanism... It’s the first initial step for them to go for an IPO later,” said Saleem Khokhar, head of equities at National Bank of Abu Dhabi asset management, adding this will be on the lines of the AIM on the London Stock Exchange.
“The seller will be quoting a price and buyer will quote his price. And the price will be arrived at if they are matching,” Khokhar said.
Tap Liquidity:
The arrangement will allow the companies to tap liquidity, without having to fully list on the exchanges.
“The investors will expect limited financial disclosures, that would allow investors to make informed decision,” Khokhar said.
“This will provide means of interactions between the forces of demand and supply, thus achieving better pricing for the companies and protecting ownership in a better way through the protection of stock records at the Clearance Department, which facilitates the easy transfer of these record whenever a company wants to convert to a public joint stock firm,” Abdullah Al Turifi, Chief Executive Officer of the Authority was quoted by WAM as saying.
DFM ready:
The Dubai Financial Market is already speaking to a number of private companies for the second market, Eisa Kazem, Chairman of Dubai Financial Market said.
Dubai Financial Market is ready to receive these companies, offering an advanced market infrastructure that uses the X-stream stock trading platform, SMARTS, which is used to closely monitor trading, as well as a variety of other services provided by DFM, Kazem said.
