Abu Dhabi’s stock market was long seen as a minor Gulf exchange, attracting little attention outside the region – a reflection of the relatively small private sector in the oil-rich emirate that has long been dominated by the state. Used to be.
But in less than four years its market capitalization has soared to more than $650 billion, driven largely by the extraordinary growth of one stock — the International Holding Company.
Headed by one of the UAE’s most powerful figures, Sheikh Tahnoon bin Zayed Al-Nahyan, IHC has been transformed into a $200 million firm, with more than 400 subsidiaries in fish farms and real estate, and a market capitalization of Rs. There is a group with of $236bn – bigger than Walt Disney, McDonald’s or L’Oreal.
Its weight adds up to $324bn, or half the market, when combined with eight listed subsidiaries, including the $65bn Alfa Dhabi.
The change has confounded bankers and analysts, who have raised concerns about transparency and a blurring of the private sector, the state and the ruling family when Abu Dhabi uses its oil profits to polish its credentials as a regional finance hub. asking for use.
“Five years ago ADX’s largest caps – then First Abu Dhabi Bank and Etisalat – were considered transparent,” said a market analyst. “Now [two of] The biggest stocks, IHC and Alfa Dhabi, are black holes. , , The market is less transparent than it used to be.”
You are viewing a snapshot of an interactive graphic. This is probably due to being offline or JavaScript is disabled in your browser.
Even the dynamics of brokerage trading on the ADX has changed, with International Securities, another company owned by IHC, now accounting for more than half the value of the market’s trades.
The expansion of the IHC “seems to be an important step in an institutional environment that previously appeared to be somewhat more transparent in the context of region-wide competition for foreign direct investment,” said a Western academic who has advised Gulf governments on governance issues. given.
closed circle?
Neither IHC nor Alpha Dhabi are included in MSCI’s UAE index, despite being the largest and third largest companies on the ADX by market value. MSCI’s criteria for including a stock in an index focus not only on size, but also whether a company’s shares are freely available to buy and how easy it is to trade.
Analysis of trading in IHC’s stock shows that it is often bought and sold in large batches of multiple trades of the same number of shares at the same time. Analysts say such deals appear to be pre-arranged and it may be challenging for investors to buy IHC shares.
Large batches of similar amounts of shares traded together make up the bulk of IHC trades. According to an FT analysis of ADX data, from January 5, 2020 to January 27, 2023, these types of transactions made up two-thirds of IHC trades. By comparison, this pattern was seen for only 8 percent of trades at Abu Dhabi Commercial Bank and 3 percent of Etisalat, two other large ADX-listed stocks.
Ownership in IHC and Alfa Dhabi is highly concentrated and the proportion of shares readily available for trading is limited. The company told the FT late last year that IHC, which is 62 per cent owned by Royal Group, an entity controlled by Sheikh Tahnoon, had a free float of about 24 per cent. Its 2021 annual report said 18 shareholders held 96.7 percent of its stock. Alfa-Dhabi’s report from the same year stated that 19 shareholders controlled more than 98 percent of its stock.
According to ADX data, foreign investors – those who have recently been either US citizens or Emirati expatriates – make up a smaller portion: 6 percent in IHC and 3 percent in Alfa Dhabi.
There is no suggestion of illegal activity by IHC, which pledged $400 million to Indian billionaire Gautam Adani’s failed share sale last week, or its subsidiaries, but their breadth and activities have left bankers and analysts scratching their heads Is.
“If you want to get exposure to them you can’t because you can’t access their shares — it’s ridiculous,” said the market analyst. “It begs the question: Why is all this happening? In a way it is beyond anyone’s control, but it definitely casts a shadow on the market. This changes the character in some ways but not at all in others, as this activity is for friends and families, it seems. It is not for the world at large to attend to.
IHC said its shares are “available in the market at a price” to anyone who wishes to invest, adding that it “adhered to the governance and compliance standards of market regulators, with information about our organization”. was open, honest and direct”.
ADX said it “operates on the highest principles of corporate governance and transparency”, adding that listed companies “must follow comprehensive disclosure guidelines in line with global standards”.
You are viewing a snapshot of an interactive graphic. This is probably due to being offline or JavaScript is disabled in your browser.
IPO and asset transfer
The influence of the state never goes away. Abu Dhabi Ports is among 13 companies listed on the ADX since 2020, which is majority owned by ADQ, a sovereign investment vehicle that also controls ADX and is chaired by Sheikh Tahnoon.
Other recent business IPOs that foreign investors are considering include Boruj, a joint venture between state oil company Abu Dhabi National Oil Company and Borealis, and satellite communications company Yahsat, which is controlled by Mubadala, another state investment fund.
But IHC and its subsidiaries have produced the most spectacular growth through large transfers of assets from related companies, with IHC’s assets rising from $215mn in 2018 to $54bn by September 2022.
Alfa Dhabi’s assets rose from $1.5bn in 2020 to nearly $13bn in 2021, the year of its listing, as it reported a rise in profits from $59mn to $1.4bn and a four-fold increase in revenue to $5bn. The number of its subsidiaries grew from 16 to over 100.
IHC says asset transfers from the Royal Group, many for a nominal fee of one dirham, have been a key driver of its growth.
Alfa Dhabi – formerly known as Trojan – was previously wholly owned by the Royal Group. The 45 percent stake was transferred to IHC in April 2021 for “zero consideration”, which is 86 percent of the company today. More than 40 companies have been transferred from the Royal Group, most of them with a nominal value of one dirham.
You are viewing a snapshot of an interactive graphic. This is probably due to being offline or JavaScript is disabled in your browser.
Multiply, a communications company previously wholly owned by Royal Group, was also transferred to IHC on 1 April 2020 for nil consideration.
It now owns a driving school, wellness firm, beauty salon and a 7.3 percent stake in Taka, a utility company controlled by ADQ and the second-largest stock on ADX.
Assets grew from $26.6 million in 2020 to over $3 billion the following year. Guna acquired at least three companies in 2021 for zero consideration: Pal Cooling, Emirates Driving School and cosmetics group Bedashing.
Multiply, which listed in December 2021 and boasts a $13bn market capitalisation, is among the 10 largest stocks in the MSCI UAE index.
a pimp’s blessing
International Securities, an Abu Dhabi brokerage firm acquired by IHC in November 2019, also experienced impressive growth to the top rank of brokers serving ADX.
Between 2018 and 2020, it handled 8 percent of trades by value and 9.8 percent of volume. According to ADX data, it now handles 64.2 per cent by value and 45.3 per cent by volume. Analysts say the data shows it buys and sells shares in large batches on ADX — a pattern that fits with trades in IHC shares.
You are viewing a snapshot of an interactive graphic. This is probably due to being offline or JavaScript is disabled in your browser.
According to IHC’s 2021 annual report, the broker’s assets are set to grow from $186mn in 2019 to $1.2bn in 2021, while revenue grew by 216 per cent.
IHC said International Securities had “rapid, yet organic growth given the number of IPOs [16] They have helped since 2020”, adding that the brokerage had attracted 25,000 “active clients”.
Stephen Hertog, a Gulf expert at the London School of Economics, said the web of companies was a reflection of “the continued deep presence of the Al Nahyan family in the Abu Dhabi economy” compared to the ruling Al Maktoum family in Dubai.
“Which is not to say that later the distinction between government and family business is crystal clear,” he said. “But there are fewer ruling family players and relatively more room for large non-royal private groups.”
Data Visualization by Chris Campbell and Patrick Maturin
