U.A.E. Regulator Said to Plan New Rules for Startup IPOs

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The United Arab Emirates’ stock market regulator is working on rules that would make it harder for startup companies to sell shares in an initial public offering, according to four people with knowledge of the matter.

The regulator will only approve applications from startups in areas not represented on the U.A.E.’s stock exchanges and of strategic importance to the economy, three of the people said, asking not to be identified as the plans are private.

The proposed regulations follow several so-called greenfield IPOs in the U.A.E. this year, where companies with no operating track record raise money at a nominal value, usually 1 dirham a share, to start operations and fund business plans.

Dubai Parks & Resorts PJSC raised 2.5 billion dirhams ($680 million) in November to fund construction of a theme park in the emirate, while Amanat Holdings PJSC generated 1.38 billion dirhams the previous month to pursue health-care and education investments in the six-nation Gulf Cooperation Council.

Shares in Dubai Parks dropped 9 percent on the first day of trading, while shares in Amanat dropped 12 percent when they began trading. Both are still trading below their IPO price. Retail operator Marka PJSC, the first company to list shares on Dubai’s exchange since 2009, trades above the nominal IPO value.

SCA did not respond to calls or an e-mail requesting a comment.

IPO Recovery

Companies in the U.A.E. generated $3.74 billion from share sales this year, compared to $774 million in 2013, according to data compiled by Bloomberg. The year’s biggest offering was the $1.58 billion raised by Emaar Malls in September.

The Dubai Financial Market has risen 17 percent this year, prompting more companies to plan sales in 2015. Daman Investments PSC expects to sell 55 percent of its equity in the first quarter, Chairman Shehab Gargash said Nov. 3, while Emaar Properties PJSC is also planning to sell shares in its hotels business, Chairman Mohamed Alabbar said in Dubai on Sept. 29.

The Abu Dhabi Securities Market, which has risen 5.9 percent this year, hasn’t had an IPO since 2011, according to data compiled by Bloomberg.