Why Go Public?

A company considering an Initial Public Offering (IPO) faces an exciting, yet challenging, decision that will represent a significant key milestone in the company's history. Deciding whether to float your company on a stock market is an important decision. Most successful privately owned companies will eventually reach a stage in their development where they consider whether the next natural step is to join a market. Joining a capital market provides the issuing entity with the opportunity to benefit from improved access to capital, increased global profile and access to liquidity. It also incentivizes the company to transform itself into a sustainable business model.

Funding of strategic
ambitions by raising capital
Acquisition
currency
Ongoing access to capital
Monetisation for shareholders
Liquid and transparent market for shares
Corporate identity and enhanced public profile
Opportunity to transform the business, its strategy and growth plans
Retention of personnel and attracting talent
Succession planning

Why list on DFM?

Dubai Financial Market (DFM) is one of the most dynamic capital markets in the Middle East. Based in the region's financial hub, Dubai, which offers a well-diversified economy in international trade, banking and finance, tourism, information technology and infrastructure. Established in 2000 as a government owned exchange, DFM provides investors and market participants the best in class international platform facilitating the ease of listing of a variety of asset classes. In 2007, the DFM was the first exchange to be publicly listed, as well as first exchange regionally to be operating with sharia' principles.

Key benefits the DFM provides a company looking to list in Dubai:

Access to a stable and transparent securities market
Effective rules and regulations
Issuer Support Program
Increased public exposure through media, panel discussions, the DFM website, roadshows and DFM communications
Innovative Issuer Services
Solid Regulatory Framework
Advanced Technologies
  • 1.
    Once the Owner or the Board of Managers3 ("Board") decides to convert the Company into a Public Company, it is recommended that representatives of the Board, along with the legal counsel, hold discussions with the relevant Economic Development to seek in-principal approval for the conversion.
  • 2.
    The Board invites the Shareholders to a meeting to approve the conversion to a Public Joint Stock Company ("PJSC"), and the new Memorandum and Articles of Association of the Company. The shareholders meeting should determine whether the IPO will follow a fixed price valuation or a book building process, as well as the offer structure (i.e. capital increase or sell-down, or a combination of both, and the percentage of each component). Also, the shareholders shall appoint a founders committee.
  • 3.
    A founders' committee is to be composed of not less than 3 members, who should represent the founders.

3. Board of directors in case of PJSC.

X
  • 4.
    On fulfilling all the requirements listed above, the Company takes the following steps:

1. Appointing a Lead Manager

The Lead Manager is appointed to do the preparatory work for going public and to appoint the other Advisors required for the IPO. Usually Investment Banks are appointed as Lead Managers. The key responsibilities of the Lead Manager include the following:

  • a. Reviewing the Company's capital needs;
  • b. Advising on the offer structure;
  • c. Drawing up a detailed timetable and coordinating the activities of the other professional advisors;
  • d. Drafting the offering prospectus, in particular the business description and business risk factors;
  • e. Drafting presentations to investors and research analysts;
  • f. Advising on market conditions and on the potential level of demand from the investment community for the Company’s shares;
  • g. Advising the Company's Directors on the primary and secondary market rules;
  • h. Developing the overall marketing strategy and promoting the Company to private and institutional investors, high-net-worth individuals and brokers.
  • i. Providing the Company with guidance on a wide range of subjects; the method of distribution, size and terms of an issue, as well as its timing and pricing;
  • j. Coordinating between the Company, its Advisors, the concerned authorities and the IPO team at DFM.
  • k. Working with the Company after flotation to sustain a liquid and well-informed market for its shares, and
  • l. Appointing the following advisors.

2. Reporting Accountant Firm (Auditing Firm)

This firm prepares the financial reporting to give the assurance that the Company is eligible for an IPO. The Report is a detailed financial and business analysis of the Company, covering its financial record, capital structure and forecasts. The Reporting Accountant Firm also audits the Company's asset valuation report and conducts an interim audit covering the period from the date of the last financial statement up to the listing date.

3. Coordination with the independent valuer

The Company will have to appoint an independent valuer to prepare a valuation report of the assets, which will constitute the founders' in-kind contribution in the capital of the PJSC.

4. Coordination with the preparer of the feasibility study

The Company will have to appoint an advisor who will prepare a feasibility study outlining the viability of the project.

5. The Legal Advisor

The Legal Advisor's primary concern is:

  • a. Carrying out a due diligence exercise on the Company;
  • b. Ensuring that all legal requirements are satisfied;
  • c. Preparing the amendments to the Company’s Memorandum and Articles of Association;
  • d. Drafting the legal component of the offering prospectus;
  • e. Liaising with SCA; and
  • f. Liaising with DFM for listing the Company’s shares.

6. The Financial Advisor

Usually the Lead Manager also acts as the Financial Advisor, advising the Company on all financial matters, and contributes to the drafting of the feasibility study. A Company may appoint a separate financial advisor, as it deems appropriate.

7. The Receiving Banks

The Receiving Banks receive the subscription funds and makes refunds to Subscribers for unallocated shares in case of over subscription.

8. The Rating Agency

The Rating Agency assists in the IPO pricing.

9. The PR/Communications Company

Some Companies prefer to seek the services of a PR/Communications Company to promote the IPO, within the legal boundaries. DFM also offers many communication tools that can be utilised through the PR/Communications agency as part of their communications planning.

Preparing the Feasibility Study

This is completed via collaboration between the Company and its Advisors.

The feasibility study should include, but is not limited to, the following:

  • a. Primary market requirements and conditions;
  • b. The market and relevant circumstances;
  • c. Potential problem areas;
  • d. SWOT analysis;
  • e. Use of IPO proceeds;
  • f. Growth plans;
  • g. An overview of the project;
  • h. Marketing feasibility study;
  • i. Technical feasibility study;
  • j. Social feasibility study;
  • k. Environmental feasibility study; and
  • t. Financial and economical feasibility study.

Preparing the Asset Evaluation Report

A valuation of assets is required to assess the Founders' contribution in kind, in the PJSC capital.

Preparing the Prospectus

The Prospectus provides a complete overview of the Company, its business, the management, risks, material agreements, and the terms of any fundraising. The objective of the Prospectus is to provide to potential investors all the necessary information to assist investors to take informative investment decision.

The Prospectus contains the following information:

  • A copy of the Memorandum and Articles of Association of the PJSC;
  • Confirmation that the Founders have deposited the percentage; required to be paid of the value of the shares they subscribed to;
  • Clarification of the maximum number of shares that a person can subscribe to;
  • The number of shares that are required to be owned, in order to be entitled to nomination for membership on the Board of Directors of the PJSC, if any;
  • The subscription date, place and conditions of the IPO, how to subscribe to the IPO, and the mandatory Investor Number (NIN) requirement
  • The percentage of UAE national ownership of shares, and conditions of disposal thereof;
  • Any other issues that affect the rights or obligations of the Shareholders;
  • Risk factors;
  • Legal corporate governance matters required by law; and
  • Synopsis of the valuation report.

The founders are jointly responsible for the validity of the information stated in the Prospectus.

X
  • 5.
    Prior to inviting the public to subscribe for the offering, the founders will have to subscribe for shares not less than 30% and not more than 70% of the share capital of the Company at the time of the IPO.
X
  • 6.
    An application is presented to the establishing authority such as the Department of Economic Development (DED), requesting the establishment of a Public Joint Stock Company, along with the following documents:
  • Minutes of the special resolution of the shareholders of the Company;
  • The amended Memorandum and Articles of Association;
  • An undertaking by the Chairman of the Board of Directors, attested by the Auditors, that the nominal value of the shares issued by the Company has been fully paid by the shareholders;
  • The number of shares that are required to be owned, in order to be entitled to nomination for membership on the Board of Directors of the PJSC, if any;
  • Audited Financial Statements for the preceding two fiscal years signed by the Chairman of the Board;
  • A valuation report of the business of the Company;
  • The feasibility study;
  • The draft of the Prospectus;
  • The trade license of the LLC company;
  • All the supporting documents of the shareholders of the LLC;
  • A letter signed by all the authorised Directors, confirming that the Prospectus includes all information within their knowledge; and
  • Acknowledgment from the founders that they have deposited the amount equivalent to the percentage of their share capital (in case of cash contribution) in a bank account
X
  • 7.
    The relevant Economic Department reviews the application and the supporting documents. They will then coordinate with SCA to discuss the application and the particulars of the file and feasibility study. The relevant Economic Department and the regulator, SCA will appoint an independent valuer to valuate the Company4. In light of the valuation report submitted by the Company and valuation report which will be prepared by the independent valuer appointed by SCA and the relevant Economic Department, the value of the Company will be determined which shall constitute the founders’ in-kind contribution in the share capital of the Company after conversion to a PJSC.

4. In case of bookbuilding process, SCA will rely on the valuation done by the independent valuer appointed by the Company provided that SCA approves the valuer.

X
  • 8.
    Once SCA and the relevant Economic Department finish and approve the feasibility study and approve the valuation report, SCA and the Economic Department will meet and issue a decree approving the conversion of the Company to a PJSC ("Joint Decision"). The Joint Decision will need to be published in two newspapers, one of them to be in Arabic, within 5 days from the date of its issuance.
X
  • 9.
    A notice to all the creditors of the Company will have to be published with the Joint Decision, giving the creditors 30 days to raise any objection they may have to the conversion of the Company to a PJSC.
X
  • 10.
    SCA will approve the final draft of the prospectus and printing of the same shall start.
  • 11.
    The Company will publish a public announcement ("Public Announcement") in a form approved by SCA indicating the date on which the subscription period will start. The Public Announcement must be published at least five days prior to opening of the subscription period.
X
  • 12.
    The Offering Period is not less than ten (10) working days and does not exceed thirty (30) days, with one extension period of not more than 10 days; the trend in the market is to leave the subscription period open for 10 to 15 days.
X
  • 13.
    Allocation of shares amongst the successful subscribers and transferred / deposited the corresponding amounts with the Receiving Banks.
  • 14.
    All subscribers are notified of the offer shares allocated to them; and any additional amount not allocated is refunded via the DFM eIPO platform.
X
  • 15.
    The Founders invite the subscribers to a constitutive general assembly ("CGA") within fifteen (15) days of the closing of the subscription5. A copy of the invitation is sent to the SCA. If the said period expires without the founders making such invitation, then, the SCA shall do so. The CGA convened is valid only if attended (in person or by proxy) by 50% of the shareholders.

If such a quorum is not achieved, then a second CGA meeting is called to convene after five (5) days from the date of the fist Assembly. The second Assembly shall be valid regardless of the number of the Subscribers represented therein.

The meeting is presided over by the person elected by the CGA from amongst the founders. SCA and the DED may send one or more representatives to attend the meeting of the General Assembly as Observers without the right to vote, and their presence shall be recorded in the minutes of the CGA.

The CGA specifically considers the following matters:

  • a. The report of the founders on the formalities of the incorporation of the PJSC and the expenses incurred in relation thereto;
  • b. The election of the members of the first Board of Directors and the appointment of the Auditors; and
  • c. The declaration of the completion of the incorporation of the PJSC.

5. It is possible to include the invitation to the CGA in the prospectus.

X
  • 16.
    Within ten (10) days of the meeting of the CGA, the Founders submit to the SCA an application requesting the declaration of incorporation of the PJSC. The following documents are submitted with the application:
  • A declaration that the capital has been fully subscribed to, the value of shares paid up by the subscribers, and a list of the Subscribers’ names and the number of shares subscribed to by each of them;
  • The minutes of the meeting of the CGA;
  • Articles of Association as approved by the CGA; and
  • The documents evidencing the validity of the incorporation procedures.
X
  • 17.
    The Chairman of SCA issues a decision announcing the incorporation of the PJSC within five (5) days from the date of ling the Application.
X
  • 18.
    The relevant Economic Department will register the PJSC and issue its trade license.
  • 19.
    The following documents are led for the purpose of registering the PJSC with the SCA, at its office in Abu Dhabi or Dubai:

The application form adopted by the SCA (filed in two copies), along with a letter giving the following details:

  • a. Name and type of the PJSC;
  • b. Address of its main office;
  • c. Duration of the PJSC and the commencement date; and
  • d. The amount of Capital and the number, value, type (cash or in-kind) of each share, and the paid-up Capital.

The following documents are submitted along with the application form:

  • Original copy of the Memorandum and Articles of Association of the PJSC.
  • Copy of the Certificate of Registration in the Commercial Register
  • statement, approved by the Chairman and Auditors of the PJSC, showing the percentage of ownership of UAE and GCC nationals and foreigners in the Capital of the PJSC.
  • A statement, approved by the Chairman, listing the names of the Shareholders, their nationalities, and the number of shares held by each.
  • A statement, approved by the Chairman, listing the names of the members of the Board of Directors of the PJSC, their nationalities and also their capacities.
  • An acknowledgment, signed by each member of the Board of Directors, confirming that they have not been previously convicted in crimes involving honour or trust or bankruptcy.
  • An acknowledgment, signed by each concerned member of the Board of Directors, declaring positions held in other Boards of Directors of other joint stock companies operating in the UAE, and the commencement date of each.
  • The name and address of the Auditors appointed for the PJSC, and
  • The addresses of the offices of the PJSC, in the UAE or outside (if any).
  • The original receipt confirming payment of the publication fees of the Memorandum and Articles of Association.
  • If requested by the SCA (by way of a letter to be sent by registered mail), the PJSC provides any other document or information required for the purposes of Registration SCA issues a Completion Certificate to the PJSC.
  • On satisfying all of the above requirements the SCA issues a Completion Certificate to the PJSC.
  • 20.
    Immediately upon the Registration of the PJSC in the Register of the SCA, the effects of all the actions performed by the Founders, on behalf of the PJSC prior to its registration, are transferred to the PJSC, and all disbursements incurred by the Founders in connection therewith are assumed by the PJSC.
X
  • 21.
    Listing of the PJSC shares must take place no later than 15 days from the date of issuing the trade license by the relevant Economic Department.
X

Key IPO Stages

The key steps for a company considering going public reflect the mandatory requirements from the Department of Economic Development (DED) and Security and Commodities Authority (SCA). From the initial evaluation of the company meeting the eligibility requirements, to appointing an advisory team and submitting all the required documentation to convert into a PJSC, through to registration and actual listing the PJSC shares on the DFM.

The below summarises the key stages of the IPO process.

PRE IPO

Meet eligibility requirements
Company Board and Shareholders
take the decision to go public
Obtain DED initial Approval on the conversion

(Steps 1 – 3)

Learn more
Appoint key advisory team to prepare:
Feasibility Study
Asset Evaluation Report Prospectus

(Step 4)

Learn more
Ensure founders subscription for
shares is not less than 30%, and not
more than 70% of the share capital

(Step 5)

Learn more
Submission of all required
documentation to DED and SCA for
establishment of the PJSC

(Step 6)

Learn more
Revision of application by DED and
SCA, and valuation

(Step 7)

Learn more
DED issues a decree approving the
conversion of the Company to a PJSC

(Step 8)

Learn more
Within 5 days of issuance date
Two newspaper announcements on the conversion and notification to all the creditors

(Step 9)

Learn more
Upon SCA’s approval of the prospectus, the company publishes a Public Announcement of the subscription

(Steps 10 – 11)

Learn more
Minimum 5 days prior to subscription start date

DURING IPO

POST IPO

Subscription period

(Step 12)

Learn more
Not less than 10 days and not exceeding 30 days
Allocation of shares and refunding

(Steps 13 – 14)

Learn more
Founders hold a Constitutive General Assembly (CGA)

(Step 15)

Learn more
Within 15 days of the subscription closing
Submission of application to SCA
requesting declaration of PJSC
incorporation

(Step 16)

Learn more
Within 10 days of the CGA
SCA issues a decision announcing the
incorporation of the PJSC

(Step 17)

Learn more
Within 5 days of filing the application
DED register he PJSC and issue its
Trade License subject to all required
documentation filed with SCA

(Steps 18 - 20)

Learn more
LISTING OF PJSC SHARES

(Step 21)

Learn more
No later than 15 days from Trade License issuance

Success Factors

There are several key factors that are required to be made when considering an IPO:

The following are the key eligibility requirements (these rules apply on the conversion of LLCs and PJCs)

1
Equity
Story
2
Business
Plan
3
Balance
Sheet
4
Financial
Reporting
5
Corporate Governance & Compliance
6
Transparency
& Control

Equity Story

  1. Develop a strategic plan around growth and formalise business planning
  2. Develop the company’s equity story, highlighting the strategy, operational effectiveness, strong track record, management credibility and unique selling proposition / market position that would attract the right investor base
  3. Should reflect the stock profile that enables investors to assess the company’s defensive and growth characteristics

Business Plan

  1. Prepare a high quality business plan for the medium and long term that serves for a basis of internal goal setting and market communication
  2. Deliver targets for longer term growth that utilise the core competencies of the business

Balance Sheet

  1. Analyse refinancing of existing debt if any
  2. Determine appropriate leverage level at IPO and raise corresponding amount of primary proceeds

Financial Reporting

  1. Finalise internal auditing and financial reporting systems and processes to ensure ability to comply with speed and quality in line with best practices
  2. Define a reporting structure that provides visibility on segmental performance where appropriate

Corporate Governance & Compliance

  1. Establish adequate governance safeguards to secure the interests of all stakeholders (in line with the best practice corporate governance code)
  2. Set up appropriate legal and board structures, appointment of independent directors to the Board, and internal audit functions ahead of IPO

Transparency & Control

  1. Formalise the way of managing the business, incorporating risk assessment as part of regular planning and control
  2. Stakeholders will demand transparency on the company’s performance, strategy, risk profile/appetite/management and control systems
Others
History of Successful Operations
Experienced Management Team
Appealing Sector Exposure
High Level of Stability and Predictability
Appropriate Size and Scale of Operations
Strong Growth Potential

IPO Library

Below are some useful documents and information to consider while thinking of an IPO:

Download Guides

DFM Guide to Going Public
DFM Guide to Investor Relations
DFM Guide to IPO Communications

IPO Team

Having the right team in place from the outset is crucial to the success of the IPO.

Company (Issuer)

Internal IPO Team

Building a quality internal team that will manage the IPO process and update the management team at every crucial stage, is more important than ever at this stage of the company’s growth plans. This would include your financial, legal and communications teams, the appointment of an Investor Relations officer as early as possible in the process, and an internal IPO Leader to liaise and coordinate with external parties.

Regulators & Economic Departments

The Securities and Commodities Authority (SCA) is authorized to verify that all respective requirements to be a public joint stock company have been implemented, subsequently approving and supervising them. SCA have an open door policy for any company considering to go public, who can present their business case and raise any enquiries. The relevant Economic Departments play an important role throughout the IPO process. The Economic Department, in conjunction with SCA, issues the resolution approving the conversion of the company from an LLC to a Public Joint Stock Company (PJSC).

DFM IPO Team

The business-wide experienced IPO team at DFM will assist you throughout the whole IPO process from the listing application, to the eIPO subscription, and the communication channels to reach investors, through to the actual listing on the market and post-listing services.
The Company is encouraged to keep an open dialogue with DFM throughout the process which includes involvement in the kick-off meeting with the advisory team.

Advisors

Appointing the right advisory team ahead of the IPO preparation is the first step in achieving a successful IPO. Key advisory members include independent IPO advisors, Lead Managers/ Book-Runners, Legal Counsels, Lead Receiving Bank, Accounting and PR/Communications firms. The advisory team will depend on the offering structure and marketing strategy.