Will LuLu IPO set new UAE record for retail investor over-subscription?
For many UAE investors, LuLu IPO will be their Diwali spending this year
Dubai: As expected, all that LuLu needed to do was announce the dates for subscriptions to its IPO for the investor floodgates to open up. This includes many first-time investors in the UAE stock markets.
Bankers in the UAE talk about ‘phones have not stopped ringing ever since the announcement’ yesterday (October 21) as investors try to get access to whatever funds available to subscribe to the IPO. The first day of subscription is October 28 and goes all the way to November 5, with subscribers to include many first-time investors in the UAE stock markets. (LuLu will also announce the offer price on October 28.)
The timeline between opening and closing dates is just incidental. LuLu will hit oversubscription in a matter of ‘minutes if not seconds’. “The groundswell of demand for the LuLu IPO has been unprecedented,” said a banker. “This will one for the record books - and there is no way that allocations will not increase.”
The banker is referring to the retail allocation in the IPO, currently at 10% and which LuLu could decide to raise at any point through the process. Market watchers echo the banker’s sentiment that some sort of increase would be there to accommodate the level of demand.
According to some investors, the LuLu IPO will be what they are ‘spending on for this Diwali’. (This is an Indian festival where the typical purchases tend to be on gold and jewellery.)
Many residents had been preparing for the LuLu IPO well ahead of the actual date confirmation, getting their family members to open bank accounts – applications to the shares can be made through banks’ digital platforms – and even when it comes to taking NINs (National Investor Number).
LuLu is a once in a lifetime opportunity for my family. The business and its founder are an inspiration for us
This, of course, has been a common feature ever since the UAE IPO boom started off in April 2022, with DEWA coming to market. Each of the highly anticipated IPOs since then garnered heavy retail investor participation, and with investors going to their banks for loans to pay for the subscriptions.
Will LuLu raise the retail investor limit?
LuLu announced a minimum allocation of 1,000 shares for retail investors and 2,000 shares for those of its eligible employees.
I know I will get a very small allocation - but LuLu is like family for us. It is something that I will pass on to my son
“It is worth noting that limited allocations are a common feature of highly sought-after IPOs experiencing abnormally large demand,” said Amer Halawi, Head of Research at Al Ramz Capital.
“(It’s) a phenomenon recently observed in the UAE market. This reflects the challenges of balancing high investor interest with equitable distribution in the context of oversubscribed offerings.
“In recent UAE IPOs, a notable trend has emerged regarding minimum allocations to retail investors. For instance, ADNH Catering offered a ‘guaranteed allocation of up to 2,000 shares, subject to oversubscription" based on a ‘minimum investment amount of Dh5,000’.
“This approach has been mirrored in most other recent IPOs, which have typically guaranteed a minimum allocation to retail investors.”
That minimum allocation is the one dominant thought in investor minds once the LuLu IPO opens.
Records that LuLu IPO targets
The market expectation is that the LuLu deal size should be $5 billion, and which ‘translates into a nominal value for the retail tranche of $125 million’, said Halawi.
“This potentially places the LuLu deal at the highest nominal value for any UAE retail tranche allocation since 2021, followed by ADNOC L&S (Dh339 million) and Presight (Dh225.5 million).
Based on overall deal subscription levels, for LuLu to achieve the largest oversubscription of any UAE IPO since 2021, it should fetch more than Abu Dhabi healthcare firm PureHealth’s Dh78.8 billion. This would be ‘equivalent to an oversubscription of nearly 172x based on the current market size expectation for LuLu’, said Halawi. (The PureHealth stock float happened late 2023.)
“If we apply the same reasoning to UAE IPOs of 2024, then LuLu should be oversubscribed by 52x to overtake Parkin’s record.”
Between October 28 and November 5, will LuLu reset UAE records on IPO take-ins?
LuLu is the one IPO that has most convinced me. It will definitely do well and it’s worth keeping for the long-term