Dubai: After Dubai’s state water and power company DEWA announced plans to list on the Dubai Financial Market (DFM) as soon as April, those looking to invest in the firm have been rushing to understand how and where. Here’s all you need to know.
With no doubt among market analysts that the initial public offering (IPO) is going to be one that’s heavily in demand, let’s look at in detail how you can benefit from investing in this prospective blue-chip stock.
What part of DEWA’s IPO announcement applies to just investors?
DEWA is offering 3.25 billion shares, or a stake of 6.5 per cent in the company, in three tranches or portions to potential investors. 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. These investors are those with a UAE-based bank account and a DFM Investor Number (known as ‘NIN’).
Any individual or institution can apply for a NIN with the Dubai Central Securities Depository LLC (Dubai CSD). Dubai CSD is licensed and governed by the Securities and Commodities Authority (SCA). (The DFM and Nasdaq Dubai are open to investors of any nationality based in any country.)
The second portion of shares in DEWA is for institutional investors (legal entities like banks, funds, insurers or any large institution), while the third portion of the preliminary share offering is for eligible employees of DEWA.
While 260 million shares are offered to individual investors, 65 million shares are offered to eligible employees of DEWA. Meanwhile, 2.925 billion shares are offered to professional or institutional investors. Each share subscriber will have a minimum guaranteed allocation of 1,000 shares.
What is the minimum investment threshold for a potential DEWA investor?
While the minimum subscription size for individual investors and DEWA employees has been set at Dh5,000, any additional investments can be made in lots of at least Dh1,000. When it comes to institutional investors, the base subscription has been set at Dh1 million. There is no maximum limit.
The share offering's subscription period is expected to run from March 24 to April 2, meaning starting March 24 potential investors can subscribe to or buy shares. But before that, those looking to book shares can send in their subscription forms via their respective banks and express their interest in buying shares.
Beyond April 2, individual investors cannot subscribe to or buy any more shares before trading commences on April 12. Similarly, after April 15, professional investors or institutions cannot subscribe to or buy any more shares, a day after which their investments will be allocated.
Individual investors will be officially allotted shares on April 11, and this is also when any excess subscription monies, if any, will be refunded back. The price range at which you, as a potential investor, can subscribe to DEWA IPO shares will be published on March 24.
(What does it mean to 'allot' shares? When an IPO gets announced, investors from different categories start applying for shares. Once the applied share gets credited to their trading account, it is referred to as allotting shares or 'IPO allotment'.)
'Subscription' or a share that is 'subscribed' are terms used to describe newly issued shares that an investor agrees to purchase before the official listing date. Subscriptions are common during IPOs and subsequent offerings. Institutional or accredited investors are most often those eligible to subscribe to a new issue.
IPOs are often under-priced to ensure that the issue is fully subscribed or over-subscribed by the public investors, even if it results in the company not receiving the full value of its shares.
If an IPO is under-priced, the investors of the IPO expect a rise in the price of the shares on the offer day. It increases the demand for the issue. Furthermore, under-pricing compensates investors for the risk that they take by investing in the IPO.
An offer that is over-subscribed two to three times is widely considered among analysts to be a 'good IPO'.
How can investors subscribe to or buy DEWA shares?
Each person looking to subscribe to or purchase shares in DEWA 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 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.
• Register to DFM eServices at DFM website or DFM Smart Services mobile application
• Login with the username and password
• Select the eFORMS tab
• Select the form and complete it
• Attach the required documents and click on ‘Submit’
• The investor will receive the Investor Number through SMS
• You will be notified by email once the status of the request is updated
(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) from Dubai CSD, appoint a licensed broker by opening a trading account and complete the necessary forms. 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 licensed brokerage firms on the DFM website, including common members across DFM and Nasdaq Dubai and their services. You can contact the brokers to inquire about the products and services they offer to investors.
The Dubai Financial Market (DFM) makes its website www.dfm.ae and its mobile application available to those with a DFM Investor Number (‘NIN’) and holding a valid iVESTOR card (which you can apply for on DFM 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 any IPO?
If you were wondering how you can increase your chances of an allotment in an IPO, here’s what you should know. 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.
