Goldman Sachs Group Inc. and Citigroup Inc. have dropped off the planned Abu Dhabi initial public offering of an investment vehicle backed by Investcorp, the Middle East’s biggest alternative asset manager, according to people familiar with the matter.
The two US banks couldn’t get internal approval for the IPO’s price stabilization mechanism, which has never been attempted before in a United Arab Emirates listing, the people said, asking not to be identified as the information is private.
The Abu Dhabi bourse had requested that the IPO have a price stabilization mechanism once the stock start trading, but none of the lead banks on the deal wanted to take on the role as it’s a gray area under UAE law, the people said. Q Market Makers LLC, which is backed by Abu Dhabi wealth fund ADQ, was eventually brought on to be the stabilization agent, the people said.
Investcorp announced the planned IPO of Investcorp Capital Plc on Tuesday. Investcorp Capital operates in the alternative investments space, providing investors with access to a global portfolio of private market opportunities, with investments in private equity, real estate, credit and general partner positions in North America, Europe, the Middle East and Asia.
Investcorp Capital and Investcorp will appoint the stabilization manager who will support the price of the shares once they start trading for the stabilization period. The statement didn’t name the stabilization manager or how long the period lasts.
Emirates NBD Capital, First Abu Dhabi Bank PJSC and HSBC Holdings Plc are still working on the IPO as bookrunners, according to the statement on Tuesday. Representatives for Investcorp, Citi and Goldman declined to comment. Representatives for QMM and the Abu Dhabi bourse didn’t reply to a request for comment.
In many major global markets, banks are allowed to steady the price of a newly-listed stock for a set period — usually 30 days after listing — via the so-called greenshoe option. The bank known as the stabilization agent can either get those shares from sellers in the IPO, or by snapping them up in the open market, which helps to support the price as it begins trading.
Both the Dubai and Abu Dhabi stock exchanges have a framework for price stabilization. However, it’s never been used before because banks fear the actions could be construed as market manipulation under article 355 of the UAE’s federal companies law, the people said.
Bahrain-based Investcorp has $50 billion in assets under management and counts some of the Middle East’s wealthiest royals and business moguls as its shareholders.
(Updates with Goldman response in 6th paragraph)