Emaar Properties had recently announced abolition of the minimum shareholding by UAE and GCC nationals in the company. According to the resolution, ‘there is no shareholding limitation for non-UAE nationals.” Emaar’s Board of Directors also recommended another special resolution to approve the increase of the share capital to Dh8.83 billion by issuing 659.05 millionfully paid-up shares at a nominal value of Dh1 per share. Both special resolutions clearly represent the vision of the company to increase the foreign ownership and appeal to international investors.
Why consider 100% ownership?
A move to 100 per cent foreign ownership allows a company to be fully open to the international markets, which allow their stocks to become widely tradable. This results in new investment opportunities and reinforces the trading environment as much as it increases the appetite of already involved foreign shareholders.
The possibility of full foreign ownership also makes the listed company more appealing in the eyes of investors. The stock will be more visible to any potential investor, which will eventually lead to higher performance. Being exposed to new international investors will subsequently contribute to higher standards being implemented.
For foreign investors, it does away with the need to employ nominee or similar structures, avoiding cumbersome arrangements, additional costs and legal uncertainty.
Are there risks?
When it comes to international stock markets, there are several risks that a company will eventually need to deal with, including more volatility and more tendency to be affected by market trends elsewhere.
What next for Emaar?
Emaar seems to be increasing growth potential for existing and potential new shareholders. Moreover, the stock has been recording high volumes and the price went up in the days after the announcement of ditching the non-resident limitation. Emaar already had 40 per cent plus foreign investor representation; nevertheless, the liquidity in the stock is expected to be even higher as foreign investors start showing interest in the freshly issued shares. This may encourage other companies to follow suit. While, across the GCC region, the possibility of full foreign ownership of publicly listed companies is still not common, we expect to see more companies adopting to the change. After all, Emaar Properties is not the first to do this – Aramex was the first.
