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No Bubble At All: IPO For Company That "Doesn't Have Current Operations" 36 Times Oversubscribed

Tyler Durden's picture




 

Over 300 years ago, the South Sea company was created (and successfully IPO'd) "for the purpose of rivaling the East India Company." It had no actual operations as of yet but the buying panic for shares was driven by greedy investors seeing the government's elite doing so well and wanting a part of the prospects of a company with no operations becoming a world leader (or just finding a greater fool). Today, the first IPO of shares on Dubai's main stock market for 5 years was 36 times over-subscribed for a company called Marka (which is a "cash shell" which does not have any current operations). Nope, no bubble here.

 

As Arabian Business reports,

The first initial public offer of shares on Dubai's main stock market for five years was 36 times over-subscribed, a sign of massive interest in equities among retail investors as the emirate's economy booms.

 

Investors subscribed AED10bn ($2.7bn) to the fixed offer of 275m shares in Marka, which were priced at AED1 each, Jamal Al Hai, chairman of the company's founders committee, said in a statement on Friday. The excess money will be returned to investors.

 

IPOs dried up in Dubai when its financial crisis erupted five years ago, and since then restrictive listing requirements have encouraged several United Arab Emirates companies to list in London rather than at home.

 

But the Dubai economy is now healthy again, and the Dubai Financial Market's (DFM) main index is up 51 percent year-to-date, making it the world's strongest major market.

 

Marka's IPO may pave the way for more IPOs in coming months.

 

Marka is a "cash shell" which does not have any current operations; it says it will spend proceeds of the IPO on opening over 100 fashion retail outlets, restaurants and cafes in the UAE and across the Gulf Arab region in the next five years.

 

The IPO raised 55 percent of the company's capital and the rest was contributed by 151 founders, including some of the UAE's most prominent businessmen. Bankers have said Marka aims to list its shares on the DFM around the first week of June.

So - investors threw record amounts of cash at a get-rich-quick scheme with no actual operations to start a business in a sector that is about as competitie as it gets and entirely saturated anyway... will we never learn?

 

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Wed, 04/30/2014 - 16:31 | 4713623 HedgeAccordingly
HedgeAccordingly's picture

Former Barclay’s CEO Bod Diamond: Investment banking will be a robust business for decades.. explains the IPO..

-->> http://hedge.ly/1m2WClD

Wed, 04/30/2014 - 16:33 | 4713630 synergize
synergize's picture

I'm waiting for the Goldman connection

Wed, 04/30/2014 - 16:43 | 4713668 Gringo Viejo
Gringo Viejo's picture

My favorite from "Extrordinary Popular Delusions And The Madness Of Crowds" by Thomas Mackay (published 1848)was a sign posted at a kiosk in London during "The South Sea Bubble"......

"A most marvelous and profitable undertaking......
no one to know what it is."

It too was oversubscribed.

Wed, 04/30/2014 - 16:59 | 4713722 Pladizow
Pladizow's picture

Here you go:

 

“But the most absurd and preposterous of all, and which showed, more completely than any other, the utter madness of the people, was one started by an unknown adventurer, entitled “A company for carrying on a undertaking of great advantage, but no body to know what it is.” Were it not the fact stated by scores of credible witnesses, it would be impossible to believe that any person could have been duped by such a project. ……. Crowds of people beset his door, and when he shut up at three o’clock, he found that no less than 1000 shares had been subscribed for, and the deposits paid. He was philosopher enough to be contented with his venture, and set off the same evening for the continent. He was never heard of again.” - Charles Mackay writing about the South Sea Bubble in Extaordinary Popular Delusions and the Madness of Crowds. – 1841.

Sat, 05/03/2014 - 20:49 | 4724849 Urban Redneck
Urban Redneck's picture

...

Wed, 04/30/2014 - 17:07 | 4713749 negative rates
negative rates's picture

That's a private line, you want the public one, silver, as en put the silver back in coin.

Wed, 04/30/2014 - 16:34 | 4713627 813kml
813kml's picture

Damn, they stole my business model.  Oh well, guess I can always sue.  

Anyone want to buy futures in my settlement?

Wed, 04/30/2014 - 16:42 | 4713663 NoDebt
NoDebt's picture

Yes, and I'll hedge that with a CDS against it in case it doesn't come through.  All with borrowed money, of course.

Wed, 04/30/2014 - 18:38 | 4714051 pies_lancuchowy
pies_lancuchowy's picture

without paying the ransom to the Tribe ..oh wait sorry - without employing most skilled consultants - you must fail

Wed, 04/30/2014 - 16:33 | 4713631 maskone909
maskone909's picture

USA treasury bonds could fit the discription of this exact article lmfao

Oversubscribed with no real operations.

Yep.

Wed, 04/30/2014 - 16:34 | 4713638 Rainman
Rainman's picture

I'm pretty sure this is how the bucket shop operation works.

Wed, 04/30/2014 - 16:35 | 4713640 NuYawkFrankie
NuYawkFrankie's picture

Marka My Words: This Will Not End Well...

Wed, 04/30/2014 - 17:22 | 4713812 Pure Evil
Pure Evil's picture

Is that kinda like a skid marka in the under shorts?

Wed, 04/30/2014 - 16:36 | 4713647 goldhedge
goldhedge's picture

I Hope these sheeple get burned.  It's the only way they will learn.

Wed, 04/30/2014 - 16:39 | 4713652 Dr. Engali
Dr. Engali's picture

Like they did the last two times the market collapsed.

Wed, 04/30/2014 - 16:38 | 4713650 Dr. Engali
Dr. Engali's picture

It had no actual operations as of yet but the buying panic for shares was driven by greedy investors seeing the government's elite doing so well and wanting a part of the prospects of a company with no operations becoming a world leader

There's the problem right there. We don't have investors, we have speculators and rentiers. They don't know WTF it means to invest.

Wed, 04/30/2014 - 16:43 | 4713670 JuliaS
JuliaS's picture

I remember the pre-ZIRP days where betting on the market amounted to guessing which way the Fed was going to set the rate at the next FOMC meeting. Now the mystery's gone. We know where the rates are and where they'll stay. Back to reading tea leaves and coffee grinds.

Wed, 04/30/2014 - 16:51 | 4713695 resurger
resurger's picture

"Evil speculators"

Wed, 04/30/2014 - 16:56 | 4713710 813kml
813kml's picture

That's a great website, BTW.  Mole is genius.

Wed, 04/30/2014 - 16:40 | 4713656 centerline
centerline's picture

First shot of high-grade IPO hopium in five years.  The financial parasites had to be drooling over this one.

Wed, 04/30/2014 - 16:40 | 4713658 oklaboy
oklaboy's picture

I have a bridge in Brooklyn, in case anybody is intrested.

Wed, 04/30/2014 - 16:43 | 4713664 A_Nejad
A_Nejad's picture

God gave them oil...He/she never said brain was part of the deal with these stupid bitchez

Wed, 04/30/2014 - 16:44 | 4713666 Godisanhftbot
Godisanhftbot's picture

 Be careful, they may buy Zero Hedge.

 Then you'd have to chase it up.

 

 Remember, like your $1200 Bitcoin buy?

Wed, 04/30/2014 - 16:45 | 4713677 JuliaS
JuliaS's picture

If I every loose my job, I'm just gonna host an IPO and retire.

Wed, 04/30/2014 - 16:46 | 4713685 Seasmoke
Seasmoke's picture

Sheikh Mohammed has a better chance winning the Kentucky Derby. 

Wed, 04/30/2014 - 17:11 | 4713765 negative rates
negative rates's picture

I have a better chance at winning the Kentuck Derby.

Wed, 04/30/2014 - 16:54 | 4713707 jmcadg
jmcadg's picture

Did MDB get his mum to 'buy at any cost'?

Wed, 04/30/2014 - 16:56 | 4713709 Mr Giggles
Mr Giggles's picture

Perhaps with the profits they may be able to buy their gold back from the London bankers. But I dought it. Just chuck the paper on the pile.

Wed, 04/30/2014 - 17:20 | 4713800 cougar_w
cougar_w's picture

I don't have any operations either.

But I'll take anyone's money who wants to send it to my PayPal account. Shucks after I'm rich I'll even send you a postcard from Athens.

Wed, 04/30/2014 - 17:21 | 4713802 Cacete de Ouro
Cacete de Ouro's picture

I have an idea. It's a little text box that you can write, I just coded it for 140 characters for the hell of it, and anyway, then you save the file and then file output it and it displays what you wrote on the screen.

Wed, 04/30/2014 - 17:25 | 4713825 jubber
jubber's picture

How can I buy this stock?

Wed, 04/30/2014 - 17:43 | 4713872 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Can you say stock market equivalent of crowd funding.

Wed, 04/30/2014 - 17:47 | 4713877 Bogdog
Bogdog's picture

Cleverly disguised conduit direct to the FED. Fuck it, let's just steal their money.

Wed, 04/30/2014 - 21:16 | 4714504 scubapro
scubapro's picture

 

 

I really like how a market that is up 51% is cnsidered 'strong'.  how resilient is a bubble anyway?

Wed, 04/30/2014 - 21:36 | 4714549 Vuke
Vuke's picture

What's with all the negativity here?  These guys have learned from the best, i.e. Wall St.

Throw out a business plan, shear the sheep, put them back into pasture then shear them again.

What's to puzzle over????

 

Wed, 04/30/2014 - 23:15 | 4714767 Dubaibanker
Dubaibanker's picture

If you see the prospectus of this shell company you will observe a few things: http://www.dfm.ae/documents/IPO/Marka_Prospectus_EN.PDF

1. 151 people have contributed USD 61m as founders. Risk is very well spread out.

2. IPO is 55% of company equity for USD 75m. Total company equity is 61m plus 75m.

3. Spending, population, tourism, Govt infra spending etc is touching new highs across the regions from multiple metros, malls, hotels, airports, nuclear plants, railway network being built for the first time ever. Not to mention real estate and MSCI upgrades. Just the plan to double the number of hotel rooms from Dec 2013 numbers, by 2020, seems insane but money seems to be flowing already!

4. Tax free zones have helped massively to foster this boom. From American giants to European companies and Asian players are all present in the region and growing.

5. Dubai being the hub and several cities being the spoke such as Abu Dhabi, Doha, Jeddah, Kuwait, Muscat etc will see major tourism spending from the region itself not to mention foreign tourists who according to data from Visa are spending upwards of USD 4bn in sales just in UAE with a tiny population of no more than 8m approx and rising. Hence, it seems like a profitable idea to capture spending of foreigners and residents alike and profit from the margins in variety of sectors i.e retail and restaurants and tourism etc.

6. These are some of the smartest people who have cut their teeth in ADIA and if they can raise millions of dollars from within their own fraternity, then the project does seem viable, I guess, unlike the Dutch Tulip mania or the US sub prime export.

7. The IPO is strictly restricted to only GCC nationals i.e. citizens of 6 countries and no one else. So, any collapse would be extremely limited to 151 individuals and the GCC nationals who invest into it. It simply cannot be exported like the sub prime to the rest of the world.

8. In terms of tourism, a group of 16,000 Chinese who came last month as 1 group literally created a Guiness book record of the largest group ever to visit another city and took over the city and am sure spent millions of dollars within a few days that they were here. Hosting tennis, now international cricket, golf events aside from MICE, film festivals, movie shootings, largest caviar plant, largest IC chipmaker, UAE is just careening from glorious height to another. Cleveland and Mayo clinic have just arrived. The real estate lesson was learnt by all major cities at inception just like the major London fire or London plague or the 1929 debacle of NYC. Such lessons are important for a new city and teething issues are expected. But past is usually always forgotten and hope keeps us all alive.

9. With Arab Spring and other issues in Egypt or Syria or Turkey or Bahrain or Lebanon etc, tourism decline in those countries has led to even higher growth recently in the last 1 or 2 years in UAE, Saudi, Oman etc. With all players being major players such as Emaar or the Govt working with billions, individual players have limited scope to grow, therefore, this plan to collaborate, issue an IPO, create a corporation with over USD 135mn in just equity, this plan seems to be the only way to capture market share in this burgeoning market.

10. With a combined population of barely 45m, out of which anywhere from 30% (estimate of expats in Saudi or Oman) upto 80% (UAE or Qatar expat population), it seems like a very sharp business plan to capture the retail spending of more than 20-30m tourists across all 6 countries every year. A small little bunch of shops in Dubai Duty free at Dubai's current airport alone have sales of over USD 1bn while the biggest mall in the world, aptly named, Mall of the World is yet to be built, the foreign attraction seems to be just starting up in a country where growth is just starting up to become a world class city. Real estate was just opened in 2004 to foreigners with  a crash in 2008 - where hard lessons were learnt - and it seems evident with overtightening of rules that a collapse hopefully will not be on the cards. Foreign banks are not participating in this growth except for the Chinese and majority finance is now done by local banks themselves who have grown rapidly both organically - and in foreign shores like Egypt and now going global such as NBAD and QNB - as well as acquiring the departing Western banks. Regardless of real estate pricing, tourism and retail spending will continue to rise.

My only wish that we should also be allowed to participate in capturing the profits arising from the tourist retail spending but guess not. Only way is to buy UAE stocks or the entire market itself. Effective May 14, MSCI millions will start flowing with the upgrade of some UAE and Qatar stocks.

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