Dubai’s Tecom Group IPO falls on trading debut, raises $454 million

Tecom Group fell as much as 17 percent in its Dubai trading debut on Tuesday.

Shares in the real estate company, whose tenants include Facebook and Google, pared some losses to end the day at 2.44 dirhams, valuing the company at $3.3 billion. The offer was priced at 2.67 dirhams a share, the top end of the range, raising $454 million.

A first day drop is rare for Middle Eastern IPOs. The last stock to fall in its Dubai trading debut was Emaar Development PJSC, which dropped 4.3 percent in its November 2017.

Dubai Electricity & Water Authority, the city’s last listing, surged 20 percent on its first day but has since given up some of its gains.

The Middle East had so far been a bright spot in an otherwise gloomy market for new share sales, but Tecom’s muted open adds to evidence that demand for risky assets has tapered.

Saudi Arabia’s al-Othaim family on Sunday scrapped plans to sell shares in its malls business and developer Retal Urban Development Co. delivered a tepid debut last week.

Tecom’s IPO price implied a dividend yield of about 6 percent. That was lower than expected from a stock that was chiefly viewed as a potential dividend play, said Faisal Hasan, chief investment officer at Al Mal Capital.

“There was not much left in the pricing side,” Hasan said. “With the decline in secondary markets, there might be some rethinking done by the issuers regarding the timing and pricing of the IPOs.”

Investors had snapped up all the shares in Tecom hours after the firm opened the books on the IPO.

But despite being covered 21 times, the deal proved less popular than some recent listings – DEWA was 37 times oversubscribed, excluding cornerstone and strategic investors, while specialty plastics maker Borouge’s IPO was about 42 times oversubscribed.

Tecom is the second of 10 proposed privatizations in Dubai as part of the city’s plans to bolster its capital markets.

DEWA’s $6.1 billion share sale was the first, and Bloomberg News has reported that a float of the city’s road-toll system is set to follow after the summer.

Supermarket operator Union Coop is also planning to list shares later this month.

Tecom houses more than 7,500 companies at 10 large business complexes, including Dubai Internet City and Dubai Media City. The listing comes as Dubai’s property values have surged, with increases topping those of every other major city last year, according to Knight Frank.

Emirates NBD Bank, First Abu Dhabi Bank, Goldman Sachs Group Inc., Morgan Stanley and UBS Group AG were the joint global coordinators and joint bookrunners for the IPO.

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