Investcorp Capital Plc's initial public offering (IPO) on the Abu Dhabi stock exchange has experienced a significant setback due to the introduction of a new price stabilization strategy. Goldman Sachs and Citigroup (NYSE:C), two major banks, have withdrawn from the IPO as they failed to obtain internal approval for this innovative post-trading control mechanism. This development has cast uncertainty over the future of this pioneering IPO.
The new price stabilization mechanism, or greenshoe option, is a standard tool in global markets used to stabilize a newly listed stock's price for a set period. While this framework is present in both Dubai and Abu Dhabi exchanges, it has been largely avoided due to fears of being interpreted as market manipulation under UAE's federal companies law.
The Abu Dhabi exchange necessitated this mechanism, leading to the selection of Q Market Makers LLC, backed by ADQ, as the stabilization agent. This requirement led to complications with Goldman Sachs and Citigroup's involvement because it is seen as a gray area under UAE law.
Despite these complications and the withdrawal of Goldman Sachs and Citigroup, other financial institutions continue their roles in the IPO process. Emirates NBD Capital, First Abu Dhabi Bank PJSC, and HSBC Holdings Plc (LON:HSBA) continue as book-runners for Investcorp Capital Plc's IPO.
These developments underscore the challenges faced when introducing new strategies in the Middle East's preeminent alternative asset management sector.
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