Adnoc IPO silences critics

Doubts floated due to lack of recent public listings unfounded

Early risers in Abu Dhabi were greeted with murky weather yesterday, with early portents suggesting the possibility of grim conditions later in the day. Luckily, conditions quickly brightened with few clouds in the sky by 10am.

One could perhaps forgive Abu Dhabi’s stock pickers for predicting a grim day for Adnoc Distribution shares, given the portents of recent weeks and months. UAE and GCC equities have had a difficult year, underperforming emerging market peers amid geopolitical uncertainties and the continued impact of lower oil prices on local economies.

Last month’s initial public offering of Emaar Development, Dubai’s first new listing since 2014, fell flat, with its shares still 10.8 per cent below their debut price.

Such murky conditions seemed a distant memory however at 10am yesterday, when Adnoc Distribution

The success of the Adnoc Distribution IPO augurs well for Adnoc’s strategy to unlock and maximise value across its portfolio

shares made their trading debut in Abu Dhabi. The stock instantly leapt 16 per cent, and held onto much of its gains for most of the day, eventually settling 6 per cent higher at Dh2.65.

Perhaps the initial surge should not have come as a surprise; investors rushed to subscribe to Adnoc Distribution’s Dh3.1 billion share offering, with the initial retail portion of the offering 22 times oversubscribed.

Interest in the IPO is not confined to retail investors though.

Arqaam Capital yesterday rated the stock a “buy”, setting a target price of Dh2.95 within a year and marking an 11 per cent rise on yesterday’s closing price. Institutional investors – one third of whom are based outside of the UAE – subscribed to 90 per cent of the company’s share offering.

The success of the Adnoc Distribution IPO augurs well for Adnoc’s strategy to unlock and maximise value across its portfolio.

While a listing of the holding company is not on the cards, the company is looking at floating minority stakes in other subsidiaries, Adnoc group chief executive and Minister of State Dr Sultan Al Jaber said last month.

The stormy clouds around Arabian Gulf markets are unlikely to dissipate anytime soon; but the success of the Adnoc Distribution IPO – Abu Dhabi’s first in six years – suggests that there will always be rays of sunshine that investors can tap into.