Over 300 years ago, the South Sea company was created (and successfully IPO'd) "for the purpose of rivaling the East India Company." [5] 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, [6]
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?