Shuaa Capital strung together two solid years over 2021-22, with some of its investments and exits delivering big. Image Credit: Shutterstock

Dubai: The Dubai investment firm Shuaa Capital is on track to script a new chpter after the stepping down of its influential managing director Jassim Alseddiqi and his decision to sell-off a sizeable stake in the company. Until recently, Alseddiqi, who had been central to the Shuaa narrative since 2016, held 30 per cent and making the biggest shareholder. (He now holds just over 5 per cent.)

On Wednesday (October 11), DFM-listed Shuaa issued a statement that its ongoing rights issue – set to raise $150 million, according to media reports – had bagged up to 40 per cent ‘soft’ commitments from bondholders. And that the company is ‘seeking’ to increase this percentage.

The Shuaa stock is trading at Dh0.28, just off the 52-week low of Dh0.27. (It’s 52-week high was Dh0.46.)

Jasim Alseddiqi
Jassim Alseddiqi, the former managing Director, has brought down his Shuaa stake from 30% to just over 5. Image Credit: Supplied

Can Shuaa's stock get its bounce back? 

“Shuaa needs some fresh impetus, the stock’s down 30 per cent in the year-to-date, and the H1-23 financials too came across as a disappointment,” said an analyst. “Shuaa shareholders will be hoping for a stop to the stock drop – any favourable outcome with the rights issue could be that point.”

The investment firm had been one of the success stories in the immediate peak post-Covid phase and had stung together two solid financials during 2021 and ’22. The biggest lift came from the sale of a stake in the Arabic music streaming platform Anghami via a SPAC deal, which then went on to list on Nasdaq.

Another favourable outcome, market analysts say, is the closer integration of the UK luxury developer Northacre within the Shuaa fold. This had seen the former launch a project on the Palm Jumeirah, and with the possibility of taking on a pan-Gulf presence at some moment.

Shuaa's immediate priorities
The rights issue will be preceded by a capital reduction and exchange offer to noteholders
of the bond maturing in October 2023.

Shuaa key objectives after the capital base tweak:

1. Improvement in 'profitability metrics befitting a leading financial services player'.

2. 'Significantly de-risk' business through debt reduction and restore balance-sheet health with sustainable debt ratios.

3. Position the company for future dividend distributions 'unencumbered by elevated
finance costs and debt service requirements'.

4. Enable participation from existing shareholders and new investors in the Shuaa growth story while increasing the free float of its shareholding to increase liquidity.

Stake sale

Then August happened. It transpired that Jasim Alseddiqi was stepping down after a near 7-year role at the top of Shuaa. He had been instrumental in turning around the loss-hit Shuaa at the time, and oversaw its integration with ADFG (Abu Dhabi Financial Group) in 2019. Alseddiqi, who had a flair for technology and tech-specific investments, also put his imprint on Shuaa’s choices.

Anghami was one of the outcomes of that.

Now, the company needs a new set of dynamics to make the process churn out growth. And get its stock price moving too.

What Shuaa's rights issue hopes to achieve
After eliciting the 40% 'soft commitment, the Shuaa CEO Fawad Khn said: “We have received positive feedback so far from our existing valued stakeholders and are pleased to provide the opportunity for all eligible shareholders to participate in our continued growth. Shuaa remains fully dedicated to managing this process diligently, and we aim to work closely with various stakeholders to ensure the success of the capital increase.
"The rights issue is one step in a series of actions, which Shuaa will be implementing within a new strategy to reposition Shuaa for growth.”

More to follow...