For a country that is taking great pains to improve liquidity in its equity markets, endorsing a buyback of Nasdaq Dubai’s most liquid stock seems an odd move.
On Monday, DP World and its majority owner Port and Free Zone World FZE (PFZW) made an offer to DP World’s minority shareholders to acquire the outstanding 19.55% of shares for around $2.7 billion.
The transaction means that DP World will be delisted, and PFZW will acquire full ownership. With the offer at a 30% premium to the share price, it is unlikely investors will refuse – though it is still waiting for approval from regulators and relevant shareholders.
The move is a blow to a market where liquidity is already very thin, and seems to contradict the government’s strategy of positioning itself as a destination for international investors.
“It is telling what is happening,” says Matthew Pigott, an assistant fund manager at Jupiter Asset Management. “We have one holding in the Gulf which has seen a deterioration in liquidity.”
Precedent
The deal sets a worrying precedent for larger companies buying out their smaller subsidiaries with little thought to the impact on the broader market or investors.