Dubai: The DEWA IPO has gone well past the over-subscribed levels with another six days left before the offer period closes for retail investors. So, the Dh7 billion plus question – Will DEWA raise the offer stake beyond 6.5 per cent?
If the Dubai utility giant does plan to raise, when will it do so?
Bankers and investors think this is likely only on or around the closing of the offer period, which is April 2 for retail investors. (Institutional investors get until April 5.)
But there are some who reckon that a DEWA announcement to hike the offer stake is imminent. Traditionally, IPO promoters tend to wait until the final moments to announce whether they will go in for a ‘green-shoe’ option, which is to retain some of the funds that fall into the over-subscribed category. In its announcement about the share offer pricing, DEWA has clearly stated that its founding shareholder vests the right to pursue such an option.
“Given the level of investor interest, chances are that the final DEWA price will be closer to the higher end of the offer price range of Dh2.25-Dh2.48,” said an analyst. “The Dubai government has for specific reasons kept the offer price at a most accessible level, to attract the widest possible interest.
“In many ways, the DEWA IPO is also about prepping the Dubai stock market for the other nine government-owned stock offerings. Holding back an announcement to raise the offer size until closer to April 2 would make sense in keeping investor interest running at a peak.
"With unprecedented demand being witnessed (for the first time on DFM), any increase in the percentage offered would be typically lower given the strategic value of DEWA. But what it does is set the stage for demand to increase for upcoming offferings, especially those related to the utility and infrastructure sector like Empower and Salik."
"Typically, in an IPO with this kind of momentum, the option of green-shoe is exercised only at the last day as investors who increasingly feel that they are going to get 'cents on the dollar' in terms of allocation apply aggressively for higher allocations. An earlier announcement to raise the stake would kill the 'buzz-iness'
Biggest since 2007
There are many reasons why DEWA is so the most awaited and sought after IPO in Dubai. It is the biggest since 2007 when DP World floated. Plus, DEWA is backing up the IPO with a dividend commitment of a minimum Dh6.2 billion each year for the next five years. (The first payment post-IPO will be in October.)
“It's quite reasonable to assume that DEWA shares are already oversubscribed considering the company's strong historic performance of profitability and attempting to fulfil corporate social responsibilities of 100 per cent clean energy by 2050,” said Mohamed Shaheen, CEO, Seven Capitals. “Thus, eligible investors have a chance to participate in the growth of Dubai through DEWA.
“The Dubai’s Financial Market’s General Index rose 18.28 points - 0.54 per cent - to 3,379.48 after the DEWA statement disclosing the indicative price range for its shares. And on the very first day, the bookings were potentially oversubscribed, people have invested in millions.”
For the moment, the wait continues for investors as to whether DEWA will indeed opt for the green-shoe.
