Abu Dhabi’s First IPO of the Year Slumps in Rare Debut Decline

Farah Elbahrawy
Wed, Jun 12, 2024,


(Bloomberg) -- Alef Education Holding Plc shares dropped on their Abu Dhabi debut, a rarity in the Middle East where initial public offerings have typically yielded near-guaranteed returns in early trading.

The shares fell as much as 19% from the offer price of 1.35 dirhams apiece, before paring the decline. That contrasted with the strong demand for the stock when the IPO was unveiled — investors put in orders worth $20 billion and the deal, which priced at the top of the range and raised 1.89 billion dirhams ($515 million), was 39 times oversubscribed.

“Opening up below IPO price reflects negatively on the valuation it was sold at and the risk appetite of investors and liquidity of the market at that point,” said Mohammed Ali Yasin, founder and chief executive officer of Oracle Financial Consultancy and Investments. “Early investors, even if they are long term, will not enjoy these first few sessions.”

The shares were down 10% as of 12:55 p.m. local time.

Abu Dhabi’s first IPO of 2024 follows three busy years for offerings in the Emirate. The 14 companies that had IPOs price since the start of 2021 saw their shares rise by about 31% on average in the first session. That ranks Alef Education’s debut far below average and marks the worst performance since that year, according to data compiled by Bloomberg.

Tech Nova Investment – Sole Proprietorship LLC and Kryptonite Investments LLC sold 1.4 billion shares, or a 20% stake, in the education technology firm. First Abu Dhabi Bank PJSC and EFG Hermes were the joint lead managers and joint bookrunners on the IPO.

Though there’s been a lull in Abu Dhabi market, other countries in the region such as Saudi Arabia have seen more IPO activity this year. Four Saudi companies have drawn a combined $176 billion in orders for their IPOs, although the kingdom’s biggest of the year — that of Dr. Soliman Abdel Kader Fakeeh Hospital Co. — was overshadowed by Saudi Aramco’s $11.2 billion mega stock offering.

UAE Education

Founded in 2016 and indirectly majority owned by Abu Dhabi Capital Group, Alef Education serves the kindergarten to 12th grade sector. It operates in countries including the United Arab Emirates, Indonesia, Morocco and the US and plans to expand both organically and inorganically.

Parents in the UAE are among the world’s biggest spenders when it comes to educating their children. Dubai’s emergence as a post-Covid haven has drawn newcomers to the emirate, where private schools are mandatory for expatriate children.

Private school operator Taaleem Holdings, which listed in Dubai at the end of 2022, initially saw its shares fall below the offer price, but they are now trading 26% higher as profit rose on higher student enrollments.

Alef said it plans to pay investors a dividend of at least 135 million dirhams for this year and 2025.

--With assistance from Filipe Pacheco and Adveith Nair.

(Updates story throughout.)