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New rules for IPO listing

DUBAI — International exchange operator, Nasdaq Dubai, on Tuesday unveiled new listing rules to ensure increased participation by individual investors in initial public offerings, or IPOs.

The wide-ranging changes proposed by the bourse in its bid to boost liquidity and woo investors also seek to introduce a new reporting pattern for listed firms as well as flexible criteria to attract family and small cap companies.

Under the new rules, all IPOs will have to reserve at least 10 per cent of the offer for individual investors, or else have a minimum of 400 institutional or individual security holders. Currently, there is no retail tranche requirement for IPOs.

Another key rule change is that listed companies now will have to report financial results on a quarterly basis rather than on a half-yearly basis.

The new rules are to be implemented in the second quarter, according to Jeff Singer, Chief Executive of Nasdaq Dubai.

Nasdaq Dubai posted the proposed rule changes its website for public consultation lasting 60 days, and said changes would promote transparency and investor protection.

Singer said the proposed rules would bring new dynamism to the market by ensuring that IPOs have a broad investor base from day one and can be easily bought by individual and other investors after listing. “We are also proposing new and more flexible rules aimed at attracting family companies small and medium enterprises. The changes would promote economic activity as well as create new investment opportunities,” he said.

Nasdaq Dubai’s existing rule that accepts companies with a minimum market capitalisation of $50 million would be retained under the new rules. In addition, a new rule would allow listings by companies with a market capitalisation as low as $20 million, provided that in such cases the pre-IPO shareholders undertake not to sell their shares within a year of the IPO, the bourse said in a statement.

The rule changes would also allow companies to list without any minimum market capitalisation provided they meet specific criteria of profitability (of $1 million for the most recent 12 months, and an aggregate of $10 million over the most recent three years), or else hold net tangible assets of $10 million. Specific rules are proposed for listing mining, oil and gas companies.

The exchange’s existing free float requirement of 25 per cent would be retained, as would its rules allowing book building.

“While accommodating a wider range of issuers, the exchange would maintain the international regulatory standards that underpin its market. Supported by the merger last July of Nasdaq Dubai’s liquidity pool with that of Dubai Financial Market, or DFM, the changes would strengthen Dubai’s growing role as a listing and trading hub,” said Lanae Holbrook, Head of Market Regulation of Nasdaq Dubai.

Nasdaq Dubai, which has less than 20 listed companies, outsourced its trading and other operational functions for equities to DFM in July 2010, enabling DFM’s more than 500,000 individual investors to trade on the same platform as Nasdaq Dubai’s institutional investors.

The new proposals would require all equity IPOs to be offered via a prospectus in the Dubai International Financial Centre. The prospectus would be filed with Dubai Financial Services Authority, the regulator of Nasdaq Dubai. This structure is in line with international standards and ensures that investors receive adequate disclosure about issuers.

The exchange said the proposed new rules would also strengthen its framework for listing exchange traded funds and Real Estate Investment Trusts. The rules for listing exchange-traded commodities and Sharia securities have been revised.
— issacjohn@khaleejtimes.com