Qatar holds the biggest-ever IPO in the GCC

But will Al Rayyan investors really fare any better? There has been an equal rush to offload Dana Gas shares, leaving some investors out-of-pocket. Is this a sign that the GCC's appetite for IPOs is beginning to run out?

So far officials say that the response to the Al Rayyan Bank IPO has been steady, but they fear a last minute scramble to buy shares like the Dana Gas issue. And the main impact of the $1.3 billion IPO has been felt in the Doha Securities Market where investors have sold shares to fund their IPO purchases, depressing the market by 4% in the first week of 2006.

GCC nationals only

The latest IPO is open to GCC nationals only, and 80% of the issue is reserved for citizens of Qatar. There is also no system for electronic applications, so to apply you need to travel to Doha or send a representative with your passport.

Typical of recent Gulf IPOs, the Al Rayyan Bank is a start-up which will not be operational for at least eight months. But public share offerings are rare in the GCC, and therefore attract quite staggering responses, even for start-up companies which necessarily have no profit record.

The last IPO in the UAE, and the then largest Gulf issue, Dana Gas, was oversubscribed by 139 times; this was actually lower than the most popular recent IPO for Aaber Petroleum last April which was 796 times oversubscribed; restrictions on UAE bank lending to applicants have helped to calm things down.

For the Al Rayyan IPO the Qatar Central Bank is allowing investors to borrow some 70% of their investment. This limitation will reduce the risk that leveraged investors could be squeezed by a falling share price, although a share price rise is naturally expected.

Last minute rush

The death of the Ruler of Kuwait this week has also kept Kuwaiti buyers away, although they could well throng to the sports stadium in Doha before January 29th. The Qatar National Bank has printed 1.2 million application forms just in case of a rush to buy, though one wonders how well Doha itself would cope with such a sudden influx of 11th hour applicants.

Whether their journey will prove worthwhile, nobody will know until the shares of Al Rayyan start trading. Thus far the high liquidity of oil revenues has kept stock markets booming in the GCC and the appetite for IPOs is immense, as they are not priced according to the market, leaving plenty of upside for investors.

The problem is that in huge oversubscriptions, funded by massive borrowings, the potential gains have been whittled away by small stock allocations, particularly after the cost of borrowing is paid.

It is, of course a bonanza for the financial institutions involved, and they as much as the public want the IPO boom to last as long as possible.