Friday, September 23, 2005

The word on the Dana Gas IPO

Over the past week I've gotten quite a few calls from friends asking my view on the Dana Gas IPO, which is going to be one of the largest IPOs in UAE history. The reason this one's special is because this time subscription is open to all GCC citizens. Since UAE IPO shares tend to double and triple in value on the first day of listing everyone wants a piece of this one. The question is: how many shares can you get? The minimum application is 5000 shares and the company says they hope to give an allocation of about 3000 shares to each applicant. However if the oversubcription is high they will not be able to do that. People have a false comfort that UAE banks no longer give the crazy kind of leverage they used to give in past IPOs. However these same people who tell me that conveniently forget that even without the UAE leverage, the fact that it's open to all gulf citizens compensates for that in numbers. Another thing is that even though the IPO ends early next week, the listing might not happen till January and the IPO prospectus does not mention the refund and allocation period. If you're planning to subscribe you should be ready to lock-in your funds for a long period.

Finally, you might want to read this:
Riyadh : Thousands of Saudis want to go to the UAE to buy shares in Dana Gas, a natural gas resource company, leading to sold-out flights to Dubai.

The reservation department of Saudi Arabian Airlines said no seats were available on its flights to Dubai from Jeddah and Dammam before September 29 and from Riyadh before September 30. The airline, however, has no plan to operate additional flights to Dubai because it would affect services to other destinations, an airline official said. Saudi Arabian Airlines operates four flights to Dubai from Jeddah, Riyadh and Dammam, carrying more than 1,000 passengers every day.

"During the last three days, we operated an additional flight daily carrying 300 passengers," the airline official said. "We operate flights to 86 domestic and international destinations. It is not fair to operate more flights to a particular city, ignoring other destinations."

The rush to catch flights to Dubai came after Dana Gas allowed all Gulf citizens to subscribe to its shares during the initial public offering, which opened on September 20. In the largest initial public offering ever in the UAE, Dana Gas is offering shares worth Dh2.06 billion, or 34.33 per cent of the company's capital.

Some of the subscribers told Gulf News that procedures were very easy. They said UAE banks allowed those who could not travel to the emirate to open their accounts with them on the basis of attested authorisation letters and Saudi passport copies. But many Saudis have requested the company to allow them to subscribe to its shares through Saudi banks or branches of UAE banks in the kingdom as Saudi businessmen figure prominently in the list of founders after UAE nationals.

As many as 1,688 Saudis have received investor numbers from Dubai in the past few days, taking the number of Saudi investors to 23,271 out of 268,364. [link]


saudis bum rush the bank

The picture above from Emirates Today newspaper:

Mass confusion surrounded the 8am opening of a branch of the Emirates Bank yesterday as about 500 Saudi Arabian men attempted to snap up subscriptions for one of the UAE’s largest initial public offering.

“When I came to work this morning at 7.30am, there were as many as 500 men lined up,” said a senior employee from the head office of Emirates Bank who had been assigned to the Mankhool Road branch.

Policemen were guarding the doors of the bank and only letting in a few customers at a time.

“Yesterday we did not guard the doors and the whole bank was filled with people,” said Nabeela Al Shehhi, a female customer service employee who was processing applications.

“Some customers were shouting and pushing our desks. If there had been no men with us, we would not have been able to deal with the situation.” A senior branch employee said: “We had people swearing at us and fighting among themselves yesterday before we were forced to call the police.

“It has been like this for the past three days, but because of the weekend, today is the busiest day we have seen so far. We expect the same amount of traffic until October 3, when the IPO closes,” he said.

It was confirmed that the branch ran out of application forms two hours after opening for business yesterday. [edited]

And in the middle of all this frenzy no one's talking about the negative rumors that the IPO itself might be in trouble. The press mentioned it just once and after that no further coverage.
some fears and questions remain about the IPO launch with the recent disagreement that erupted between Crescent Petroleum Company, one of the major investors in Dana Gas, and the Iranian gas supplier, Iranian National Gas Company.

Dana Gas' newly acquired assets and facilities will initially be supplied with gas by Crescent Petroleum, which is importing substantial gas volumes from Iran to supplement and underpin domestic gas resources. According to MEES, significant volume will be imported from Iran under a 25-year supply contract.

The Iranian National Gas Company recently demanded from Crescent Petroleum Company to increase the previously set and agreed upon prices due to the big hike in the prices of global energy sources.

An informed source, who asked not to be identified, said Crescent Petroleum Company refused in a written response any possible adjustments to the previously agreed prices; therefore, Iranian company threatened to resort to arbitration.

The source pointed that any price hike will be a major dilemma for Dana Gas in fulfilling its previously signed agreements with UAE end users.

Mohammad Bin Dha'en Al Hamili, UAE Minister of Energy, has sent a letter to Crescent Petroleum to inquire about the company's ability to fulfill its commitments to end-uses and provide gas to Federal Electricity and Water Authority (FEWA). However, Crescent Petroleum did not provide a reply so far, which increases suspicion about the situation inside the company.

Sorry I don't have a source for the above, it was emailed to me earlier this week.


aliasa said...

Apparently what crescent is selling to the public may not exactly be the cream of their crop, but then in a market that's soaring how many punters bother finding out too much about what they're actually getting into... hey if you actually end up getting any shares you'll probably still make money tho.

Mansur said...

isnt it amazing how people can descend into behaving like mad men..all in the name of money!


3omani said...

I went to Fincorp in the CBD yesterday to hand in my application forms and it was worse than the fish market. Their doors were locked and an employee was accepting forms from a sweaty and impatient crowd outside. A fight almost broke out.

Hats off to Fincorp employees for their patience. I could have never done it. But wouldn't it have been much easier if all this could have been done online?

De Coolest 1 said...

I've read so much about this craze for the Dana Gas IPO, similar (rather much more) to the Omantel IPO. If rumours are to be believed, they say the share, upon listing, is bound to open at 8-10 times the subscription price. With the energy prices soaring, no wonder the craze for this IPO!

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