A new trading platform for the UAE’s private joint stock companies has been approved by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai.
The initiative, first announced by the Securities and Commodities Authority (SCA) in February, is aimed at improving corporate governance and transparency in the sector including strengthening anti-money laundering efforts, according to a statement on Wam on Tuesday.
Firms classified as private joint stock companies can sell shares to individuals without going public.
Trading in shares of as many as 135 firms should begin over the next few months on the new platform, the regulator said.
Sultan bin Saeed Al Mansouri, Minister of Economy and Chairman of the Board of Directors of the Securities and Commodities Authority said that the move could spark similar developments across the GCC and other Arab countries.
The new platform, which is also open to companies from GCC and Arab countries, is also expected to help private firms access more funding and improve liquidity for their shares.
“This will provide means of interactions between the forces of demand and supply, thus achieving better pricing for the companies and protecting ownership in a better way through the protection of stock records at the Clearance Department, which facilitates the easy transfer of these record whenever a company wants to convert to a public joint stock firm,” said Abdullah Al-Turifi, chief executive of SCA.
In February, the regulator said that both the Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM) this year will launch separate screens for investors to trade shares currently bought and sold over the counter.
Brokers who traded shares of private companies such as Abu Dhabi Cooperative Society and Manazel Real Estate were jokingly referred to as “Dr Briefcase” because they carried valuable documents needed to process the trades.
Several major companies are still traded outside the market, including Manazel, Al Qudra Holding, Noor Capital, The National Investor and RAK Petroleum. The supermarket chain Abu Dhabi Cooperative Society is arguably the most prominent company traded over the counter.
After the global financial crisis, many companies preferred to stay outside the market because they believed their valuations were much higher than what the bourses would offer, or because their shareholders want to keep control.
It is hoped that the new platform will stimulate interest in a full listing on one of the main exchanges, SCA said, amid a resurgence in equity markets with both the DFM and ADX showing significant gains this year.
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