Eshraq IPO a start, but not yet the revival

Eshraq, an Abu Dhabi property developer, this week became the latest company to announce plans to tap the capital's equity market in an initial public offering (IPO).

It is the third planned IPO in Abu Dhabi this year, following similar moves by the insurance companies Wataniya and Insurance House.

After an IPO drought lasting more than two years, this is a positive trend, but not as significant as it first appears.

All three offerings have been relatively small. Wataniya plans to raise US$22.5 million, while Insurance House pulled together just $18m after barely meeting the minimum subscription target when the IPO closed last month.

Eshraq is the largest of the three, aiming to raise $224m.

But that is a pittance compared with, for example, the potential $11 billion listing by the mining and trading giant Glencore in London.

An IPO is an important means of raising money to fund investment; in Eshraq's case, for its property development.

It also allows some companies to function legally: insurance companies must list a percentage of their shares before they can begin operations. But it appears these public offerings are more formalities than legitimate boosts to the market.

In two of the cases, the influx of fresh capital is further compounded by limiting buyers to GCC nationals.

Equity markets in the GCC have suffered both depressed volumes and market value erosion. Even the option to list on international markets has been limited, after both Kuwait Energy Company and Topaz Energy and Marine scrapped their plans to list in London.

Majd Maaitah, the director of securities services at National Bank of Abu Dhabi and a banker directly involved in all three of the IPOs, said the UAE market cannot accommodate a listing worth billions of dirhams. Rather, "there is a need for small IPOs".

This may be true, but the market will not enjoy a significant confidence boost - or a return of liquidity - until a major company lists its shares in the capital again.