Dubai Taxi Co.’s initial public offering (IPO) was covered within an hour of opening on Tuesday, demonstrating strong investor appetite for the government’s first privatization deal in over a year.
IPO Covered in Record Time
The offering of up to 1.16 billion dirhams ($315 million) received enough demand to cover the books throughout the indicated price range of 1.8 dirhams to 1.85 dirhams per share. This values the emirate’s largest taxi operator at up to 4.62 billion dirhams.
Investors have until November 29th to place orders, with the final offer price to be announced on November 30th. Trading on the Dubai Financial Market is expected to commence on December 7th.
First Privatization Since 2022 IPO Bonanza
This marks Dubai’s first IPO after last year’s blockbuster share sales which raised $8.3 billion from listings of state assets like the Dubai Electricity and Water Authority. It is part of the emirate’s plan revealed two years ago to list 10 government-owned companies to boost trading volumes.
So far this year, the only other Dubai IPO was Al Ansari Exchange’s $210 million offering in March. However, Dubai Taxi’s debut comes amid a flurry of IPO activity in the UAE, with Abu Dhabi based Pure Health and Phoenix Group also recently announcing plans to go public.
Dubai Taxi Well-Positioned to Benefit from Influx of New Residents
As Dubai’s largest taxi operator controlling over 40% of the market, Dubai Taxi is expected to benefit enormously from the emirate’s surging population.
The influx of wealthy foreigners and digital nomads after COVID-19 has boosted the city’s population over 3 million. Furthermore, the UAE government’s plan to attract millions more residents over the next decade bodes well for taxi demand.
Financial Metrics and Dividend Policy
Dubai Taxi has forecast paying at least a 71 million dirham fourth quarter dividend in April 2023. Furthermore, it plans to distribute over 85% of net profit bi-annually as dividends from fiscal year 2024 onwards.
Citigroup, Emirates NBD Capital and Bank of America are acting as joint global coordinators on the offering. Meanwhile, Rothschild & Co. is the independent financial adviser.
Additional Analysis: Dubai Deepens Capital Markets in Push for Sustainable Growth
Dubai Taxi’s overwhelmingly positive IPO book-building underscores investor enthusiasm for Dubai’s equity market at a time when global IPO volumes have declined significantly.
The deal comes right after the emirate hosted the COP27 UN Climate Change Conference, highlighting its commitment to environmental sustainability. The success of this IPO further cements Dubai’s status as the region’s top financial hub.
Moreover, attracting high quality companies to list locally is key to deepening capital markets, according to analysts. By privatizing state-owned enterprises, Dubai can raise funding for economic diversification while enhancing transparency and efficiency through private ownership.
With Dubai Taxi’s order book covered instantly, more family companies may also now consider going public to expand their capital bases. Ultimately, sustaining economic growth post-COVID requires broadening and deepening capital markets.
So while the Blockbuster Dubai Taxi IPO will deliver short-term proceeds, its long-run impact could be much greater in spurring a listings wave that transforms the emirate into a global markets powerhouse.