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Middle East Report 2009| pfi| 29


There is typically no investor roadshow on local style IPOs in the Middle East


an IPO when local investors sell existing positions to free up cash to subscribe to the IPO.


The final structure that was approved by the Qatar Financial Markets Authority (the QFMA) involved offer- ing shares to Qatari individuals as well as institutions that were 100% Qatari-owned. There was a cap imposed on sub- scribers of 1,690,800 shares, representing 0.5% of the total number of shares offered in the IPO, for both individu- als and institutions, in order to be seen as treating both individuals and institutions equally as well as to try to pro- tect any significant outflows from the DSM. Moreover, in order to ensure a widespread distribution of shares among Qataris and to limit institutional involvement, an allocation policy was devised that prioritised individuals ahead of institutions. The structure proved successful, with 72% of the offer shares taken up by retail investors. The shares were offered at a price of QR10 (with addi- tional QR0.25 offering costs). The pricing was based on the licence cost and enabled new investors to acquire a stake in Vodafone Qatar effectively at the same entry price as the shareholders' consortium that bought the licence. Given that the IPO was targeted principally at retail


investors, the shares were offered through a network of receiving banks, with HSBC Bank Middle East and Qatar National Bank acting as lead receiving banks. Their role was to consolidate all orders from a list of a further 10 banks that assisted in distributing subscription applica- tions, prospectuses and processing orders. There is typically no investor roadshow on local-style IPOs in the Middle East and marketing the Vodafone Qatar IPO focused on raising awareness among the population through a focused advertising campaign, a number of press conferences as well as events to which members of the public were invited. Other challenges with respect to the marketing of the offering related to specific concerns from investors. These included concerns regarding the lack of dividend payments in the first years of operation of the company as well as whether the company was Sharia-compliant, a debate that involved a number of dif- ferent scholars and proved ultimately inconclusive but certainly impacted potential demand from investors. The Qatari market is used to new issuers, as existing oper- ating companies, paying dividends more or less immedi- ately after an IPO. As a greenfield operation, and Vodafone's first start-up in over 10 years, Vodafone Qatar was a dif- ferent proposition, needing significant capital expenditure in the first years of operation to build out its network and deliver its business plan, which took priority over paying dividends. This required careful marketing to manage investor expectations, which was successfully achieved. In addition, during the preparation for the IPO, there was a transition of regulatory authority for the supervision of listings on the DSM from the DSM itself to the newly estab- lished QFMA. The IPO transaction team needed to strad- dle this transition, dealing with a number of new rules,


The


structure proved successful with 72% of the ofer shares taken up by retail investors.


procedures and personnel. In many instances the advisers needed to find innovative solutions to issues posed by the fact that the regulatory regime in Qatar had never had to deal with the IPO of a multinational company before. This required close liaison with the QFMA to deliver the IPO. Also, one of the regulatory requirements was for the


official IPO prospectus to be in the Arabic language. All of HSBC, QNB and Denton Wilde Sapte were able to field bilingual Arabic/English speakers to allow the smooth transition of a draft prospectus produced by necessity in the English language for the benefit of the largely Eng- lish-only speaking working group into Arabic at every turn, including liaison in Arabic with the QFMA. Vodafone Qatar is in the process of applying to the QFMA to list the shares on the Doha Stock Market. Once listed, the shares may be traded and transferred without any foreign ownership restrictions, in accordance with the rules and regulations of the DSM.


VOLATILITY — REMAINED HIGH AHEAD OF LAUNCH


85 75 65 55 45 35 25 15 5


Jan 08 Source: Bloomberg DSM —SIGNIFICANT CORRECTION AHEAD OF IPO DSM -39.8%


12,000 10,000 8,000 6,000 4,000


Jan 08 Source: Bloomberg Mar 08 Jun 08 Aug 08 Nov 08


Subscription period


US volatility index European volatility index


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