Lulu IPO opens to investors: How do I buy shares ahead of its listing?

Dubai: After grocery retailer Spinney’s, LuLu Group announced plans to publicly list its retail unit on the Abu Dhabi Securities Exchange (ADX) next month. If you were looking to invest in the firm and wanted to know how and where, here’s all you need to know.

The much-awaited initial public offering (IPO) of one of the Middle East's largest hypermarket chains opened for subscription at 8am on Monday, with Bloomberg News reporting that demand for the listing already exceeded the number of available shares, an hour after books opened on the deal.

What do we know of the IPO so far?

• A total of 2.58 billion shares in Lulu Retail, representing 25 per cent stake in the company, are to be publicly sold by the company’s sole shareholder, Lulu International Holdings Limited.

• The subscription period, which is the time period investors can subscribe to shares, starts today and is expected to close on November 5, 2024.

• Shares of Lulu Retail Holding will list on the Abu Dhabi Securities Exchange by November 14.

• The offer price range has been set between Dh1.94 and Dh2.04 per share, with size of the offering between Dh5.01 billion and Dh5.27 billion.

• Based on the offer price range, Lulu Retail is set to list with a market valuation of between Dh20.04 billion and Dh21.07 billion.

But what portion of these are for individual investors?

• The first portion of shares are made available to ‘retail’ investors, who are non-professional individual investors who invest money themselves or through brokerage firms.

• The first round for individuals and eligible staff, 258.222 million shares, or about 10 per cent stake, will be up for subscription.

• Each subscriber, excluding eligible staff, will get a minimum allotment of 1,000 shares, while each eligible employee will be allotted 2,000 shares - but that’s subject to change on demand for the IPO.

• The second portion of shares in Lulu Retail is for institutional investors (legal entities like banks, funds, insurers or any large institution).

What is this mean for a potential investor?

• Beyond November 5, individual investors cannot subscribe to any more shares before trading commences on November 14. Investments will be allocated a day after subscription period closes.

• Individual investors will be officially allotted soon after November 5, and this is when any excess subscription amount, if any, will be refunded back.

How can investors subscribe to Lulu shares?

Each person looking to subscribe shares in Lulu needs to submit one subscription application each, through his or her bank or brokerage, in his or her personal name (unless he or she is acting as a representative for another subscriber).

Subscribers or potential investors must ensure to have an updated ADX Investor Number (NIN) and complete all relevant fields in the subscription application along with all the required documents and submit it to the bank, together with the subscription amount expected to be made during the offer period.

(Note: UAE nationals and residents need a valid copy of Emirates National ID, while non-residents need a valid copy of the passport. After obtaining an Investor Number (NIN), opening a trading account and complete the necessary forms through a licensed broker. The broker carries out the trading transactions (selling and buying) at your instructions. Different brokers may offer different services and products to their clients. To select a brokerage firm, view the full list of licenced brokerage firms on the ADX website. You can contact the brokers to inquire about the products and services they offer to investors.)

The Abu Dhabi Securities Exchange (ADX) makes its website and its mobile application available to those with a National Investor Number (‘NIN’) and holding a valid iVESTOR card (which you can apply for on ADX when opening a trading account). This is also possible through online banking via UAE Central Bank payment gateway or through UAE Central Bank Fund Transfer (‘FTS’).

The investor choosing the FTS method will be required to provide their valid NIN, along with the value of the offer shares subscribed for, with the dates relevant to the methods of payment of the subscription amounts.

What to keep in mind when buying shares in an IPO?

If you were wondering how you can increase your chances of an allotment in an IPO, here’s what you should know, according to Brody Dunn, an investment manager at a UAE-based asset advisory firm.

• All IPOs are most often available only for the first few days of the bidding process. If you are planning to bid, bid within the first few days, if possible one day of its availability. Bidding early as possible increases your chances of allotment.

• Most often there will be more demand than supply for a new IPO. For this reason, there is no guarantee that all investors interested in an IPO will be able to purchase shares.

• Those interested in participating in an IPO may be able to do so through their brokerage firm, although access to an IPO can sometimes be limited to a firm’s larger clients.

• Generally speaking, IPOs are popular among investors because they tend to produce volatile price movements on the day of the IPO and shortly thereafter. This can often produce large gains.

• Ultimately, investors should judge each IPO according to the prospectus of the company going public, as well as their financial circumstances and risk tolerance.