To buy shares in Etihad, you need a UAE stock broker that offers access to the ADX exchange like eToro.
The full details here will only be available once the offer is confirmed and the associated terms are published. The Lulu Retail IPO did have provision for international retail investors to participate, but as we have seen the risk of significant oversubscription resulting in any positions being scaled back is worth taking into account.
The imminent Etihad IPO
With a fleet of 100 aircraft serving 90 destinations across the globe and the main sponsor of Manchester City FC, Abu Dhabi’s national airline Etihad is one that many will be aware of. Currently wholly owned by the emirate’s sovereign wealth fund ADQ, reports suggest that plans are now well-advanced to launch a $1bn IPO for 20% of the business, selling new shares to fund growth ambitions. Expectations had been that the offer would be formally made during the last week of February, although at the time of writing this still hadn’t been announced.
The regional IPO market
At a time when it’s difficult to escape the headlines in London repeatedly highlighting how the UK’s IPO market is at a standstill, this would be the second UAE firm to come to market this year, following the recent announcement by technology services firm Alpha Data that it would be offering 40% of its stock for sale. That has been priced at the top end of expectations, with the offer being significantly oversubscribed – a theme that is common with such offers across the region. Last October, the Lulu Retail IPO was 25 times oversubscribed, whilst in May, the IPO of supermarket group Spinneys saw its offer 64 times oversubscribed.
The consistent demand appears to be a combination of international investors wanting access to high quality local assets, along with being reflective of the scale of the so-called “dry powder” capital that’s available locally, where unallocated cash is looking for a more productive home. Supporting that is the fact that in the region, new issuers are typically keen to promote the expected dividend alongside the offer document. Alpha Data’s IPO will see it delivering a dividend yield of 8.7%, which would put it amongst the best paying stocks locally.
With Etihad being the first airline from the region to IPO since Air Arabia sold stock on the Dubai market in 2007, expectations are that demand will again be brisk for investors who are keen to get onboard, both with the company itself and for exposure to this high profile industry which is a vital component in fuelling growth across the GCC. It’s also seen as likely that a successful filing here will act as a catalyst for other airlines in the region who are looking to offer shares for sale. The low-cost Saudi Arabian airline Flynas is progressing with its own IPO plans and the traction here will arguably pave the way for the likes of Emirates and Qatar Airways to participate, too.
The performance so far
Etihad posted annual results earlier in February, noting a post-tax profit of Dhs1.7 billion – treble the figure recorded in 2023 – as passenger numbers jumped 32%, reflecting the company’s recent successful expansion. The picture hasn’t however always been so upbeat for Etihad, following the failure of its strategy to invest in European airlines almost 10 years ago which ran up some significant losses. However with that episode now well behind the airline, growth is firmly on the horizon, backed by Abu Dhabi’s desire to further diversify its economy away from its oil centric traditional roots.
Anticipated price behaviour
Recent IPOs in the UAE have been characterised by extremely strong demand for the initial offer with many investors being subject to scaling back. With only a minority of stocks being offered for sale – with Etihad 80% will be retained by the sovereign wealth fund – the shares are likely to be priced accurately, so that may reduce the prospect of a day one spike. Indeed the fear of missing out could see early investors paying a premium for their stake. As an example, Lulu Retail, despite being 25 times oversubscribed, saw its share price fall back on debut, before unwinding further. And although Spinneys saw a brief jump higher on its first day of trade, the gains were short lived, again underlying the accuracy of the initial valuation.
Tony Cross is a seasoned market commentator with over 15 years of experience, delivering engaging and insightful content for both journalists and investors. Specializing in macroeconomics, UK blue-chip equities, and intermarket analysis, his commentary is highly valued for its clarity and its knack for eliminating unnecessary jargon.
You can contact Tony on tony@goodmoneyguide.com
