This was not how things were supposed to go for DP World.
Dubai's ports operator has had six days of trading since being listed on the London Stock Exchange (LSE). The move, we have been told for many months, would encourage new shareholders on to the register, liberate the shares from the shackles of Nasdaq Dubai, inject liquidity and volume into the stock and ultimately lift its market value to truly reflect its world-class status.
Instead, the shares have lost nearly 4 per cent since they began trading in London. This cannot be described as a crash, but a downwards move was not what the company, or most market analysts, expected in the run-up to the listing.
There was never a chance DP World would "pop" like some cutting-edge social networking site. Since the plans for the London listing were announced in March, the shares have performed strongly, hitting a two-year high of US$13.90 on Nasdaq Dubai. You could argue the London listing was in the price even before it took place.
But many analysts expected a small premium for goodwill once London trading got under way. This has not yet happened.
Most perplexing, however, has been the record of trading volumes. On Nasdaq Dubai, where DP World is by far the biggest stock traded, it has recorded about 2.5 to three times previous levels.
Conversely in London, after a surge on the first couple of days, the issue seems to have gone largely unnoticed. By lunchtime yesterday, there had been one trade of 3,000 shares; the previous day, there was no business at all.
This pattern - bigger trading in Dubai and barely a flicker in London - is the diametric opposite of what most experts had expected. Nasdaq Dubai will not be complaining, but this is not how the story was supposed to unfold.
So what is going on? There are a couple of obvious things that should be mentioned.
First, world equity markets have been weak since the beginning of the month, spooked by the continuing euro-zone debt crisis and poor economic signals coming from the US. Insiders say that if the DP World listing had been a cash-raising initial public offering, the company might have considered pulling it altogether.
Second, the depository interests (DIs) that are listed on the LSE are not that familiar to many investors. Most foreign companies choosing to list in London opt for some form of global depository receipts. DP World went for DIs because they are closer to ordinary equity and therefore more like the shares traded in Dubai, thereby ensuring "fungibility" (ease of substituting London and Dubai shares).
But there is a bit of an education job to be done, even for comparatively sophisticated investors, about DIs.
There is also a technical issue about how long it takes to register DI trades on the LSE's daily record. The apparent lack of trading the past couple of days in London will show through in a few days time, DP World advisers say.
Weak global markets and technical factors fall into the category of "known unknowns", as Donald Rumsfeld might say, and are outside DP World's control.
But another factor has emerged as a serious problem, according to analysts in the UK and the UAE: the comparatively small size of the "free float" of shares on offer for potential investors.
DP World is 80 per cent owned by Dubai World, which means only 20 per cent of the shares are "free" to trade in Dubai or London. Many international investors do not like the idea of being locked into a stock beside a dominant owner, especially when that owner is a government-related entity. Many regard 25 per cent as the absolute minimum that should be freely available before they will buy.
The influence that Dubai World can exert on the affairs of DP World has been largely benign, but it was highlighted as one of the risk factors in the prospectus for the London listing, and certainly seems to have caused some investors to be wary.
Dubai World may be considering its options in this respect. Its subsidiary Port & Free Zone World has liabilities of $850 million (Dh3.122 billion) that have to be repaid by the end of the year, and a sale of DP World shares is one option to settle this debt.
At current prices, the disposal of just 10 per cent would clear this liability, leave cash in the bank, and bring in a second raft of new investors. If the shares approach the new target price of $17 set by Nomura, it seems a no-brainer.
