Where are all of Doha’s family IPOs?
In a recent speech, the prime minister of Qatar HE Sheikh Hamad bin Jassem bin Jabor Al Thani has urged more private sector companies to list on the Qatar Exchange (QE), saying that the limited number of listings do not reflect the size of the Qatari economy. But are the family-owned businesses ready?
Opening a conference that mulled ways to encourage private companies to go public and help the country achieve its national vision, the prime minister HE Sheikh Hamad bin Jassem bin Jabor Al Thani exhorted family-owned businesses to seek listing, saying that it would be beneficial for both the owners as well as the national economy.
Lamenting a limited number of listed companies on the Qatari bourse, the prime minister has said that larger business entities – a hint at big family-owned businesses and other private sector players – still remained out of the ambit of the QE which has 42 listed entities, with the last IPO taking place some three years ago.
The spirit of reluctance to list on the bourse is a pan-Gulf Cooperation Council (GCC) phenomenon, which has been reflected in a study done by Deloitte recently. Deloitte attributes the low number of IPOs in the GCC due to stricter regulatory measures and lack of liquidity. Commenting on the Deloitte study, Matthew Lewis director of Middle East and North Africa for Boyden Global Executive Search said, “Regulatory factors are a key determinant and a lack of liquidity in the traded stocks means little incentive for the investor in seeing any upside in their investment. To incentivise more local companies to list, they should be provided with the relevant expertise and assistance, and given professional support from advisors and companies that have been through that process before.”
“A company needs to put in place its growth strategy before it opts to list on a stock exchange,” - Mohamed J. Jaidah, group executive director, Jaidah Group.
Declan Hayes, managing director at Deloitte Corporate Finance Limited in the Middle East and North Africa region, says, “Whether a business is contemplating a listing on the Bourse Dubai, the Muscat Stock Market or a future SME market (as has been tabled in Doha and Dubai), a company’s readiness to list will be the key differentiating factor between those that are first past the finish line when the IPO window opens.”
Advantages of listing
Talking to The Edge on the advantages of listing, Sheikh Faisal bin Qassim Al Thani, chairman of Aamal Company, a listed entity on the QE, said, “Aamal Company has benefitted from all the advantages of public listing. Today, investors in the Gulf and in more developed financial markets regard Aamal Company as one of the best managed companies in the region. Since its listing, the company has grown in headcount, revenues and shareholders, establishing joint ventures with leading world-class multinational companies, since these companies regard Aamal as the partner of choice when wanting to enter the Qatari market.”
Agreeing in spirit with the fact that listing brings many advantages, for Mohamed J. Jaidah, group executive director, Jaidah Group (a non-listed family-owned business group) said, “Listing gives a company access to capital which can be used for the development of the company. But the company needs to put in place its growth strategy before it opts to list on a stock exchange, since the strategy would dictate that growth, mainly pertaining to the use of the capital that a company raises by way of the listing.”
One of the main problems of the traditional family-run businesses in Qatar is that they have a very classical take on the way their businesses need to run. Jaidah said, “Most family-owned businesses have different business divisions, in different fields, which are then managed by a holding company. So it is very difficult to put a unified strategy in place for so many different divisions.” Contrarily, most companies in the United States or Europe have a single business focus which makes it easier for them to put in place a single and unified growth strategy.
Lewis echoed Jaidah’s sentiments and said that in most cases family companies are not currently at the relevant stage of their development to list in Qatar. Reflecting Jaidah’s take on the growth strategy of companies, Lewis added, “First companies have to decide that they want to go ahead with listing, which often has implications that they had not previously considered or had to achieve, like three years fully audited accounts, and implementing levels of transparency required by the market, investors and regulators.”