Dubai: With six days left before the offer period for retail investors concludes, the DEWA IPO has surpassed the over-subscription levels. So, will DEWA increase the offer stake over 6.5 percent, resulting in a Dh7 billion plus question?
When, if ever, does the Dubai utilities behemoth aim to raise?
Bankers and investors believe this would happen only near the end of the offer period, which for individual investors ends on April 2. (Institutional investors have until April 5 to make a decision.)
However, others believe a DEWA declaration raising the offer stake is inevitable. Traditionally, IPO promoters have waited until the very last minute to disclose whether they will choose for the ‘green-shoe’ option, which allows them to keep some of the funds that have been oversubscribed. DEWA plainly mentioned in its announcement about the share offer pricing that its founder shareholder has the right to seek such an option.
“Given the strong level of investor interest, the ultimate DEWA pricing is likely to be closer to the higher end of the offer price range of Dh2.25-Dh2.48,” one expert said. “The Dubai government has kept the offer price at a most affordable level for certain reasons, in order to attract the widest potential interest.”
“The DEWA IPO is, in many respects, about preparing the Dubai stock market for the other nine government-owned stock offers.” It would make sense to postpone an announcement about increasing the offer amount until closer to April 2 in order to maintain investor enthusiasm high.
“Given the strategic value of DEWA, any increase in the proportion offered would normally be smaller given the exceptional demand (for the first time on DFM). But it does set the groundwork for increased demand for new offerings, particularly those in the utilities and infrastructure sectors, such as Empower and Salik.”
Since 2007, this is the largest.
DEWA is the most desired and sought after IPO in Dubai for a variety of reasons. It is the largest since DP World went public in 2007. Furthermore, DEWA is supporting the IPO with a five-year dividend commitment of at least Dh6.2 billion. (The first payment will be made in October, following the IPO.)
“Given the company’s great historical profitability and attempts to fulfill corporate social responsibilities of 100% clean energy by 2050, it’s logical to believe that DEWA shares are already oversubscribed,” said Mohamed Shaheen, CEO of Seven Capitals. “As a result, eligible investors have the opportunity to participate in Dubai’s growth through DEWA.”
“After the DEWA statement indicating the indicative price range for its shares, the Dubai Financial Market’s General Index increased 18.28 points, or 0.54 percent, to 3,379.48.” And the first day’s bookings were potentially oversubscribed; people had put up millions of dollars.”
For the time being, investors are waiting to see if DEWA would choose the green-shoe option.