The cancellation of Axiom Telecom's IPO this week leaves a bitter taste.
To withdraw a market flotation just 48 hours before listing, after months of preparation, raises fundamental questions about markets in the UAE and the regulatory regime that oversees them. With Dubai considering a multibillion-dollar privatisation programme, some urgent concerns have to be addressed.
The official reason given for the cancellation was concern on the part of the company for the state of market sentiment in the region, especially the issue of liquidity. The finger was pointed at NASDAQ Dubai, the market where the stock would have been listed, and which has been bedevilled by liquidity and volume issues since it was launched in 2005.
I have my doubts about this. Sure, NASDAQ Dubai has had its problems, but it has addressed them to the best of its ability. The common platform introduced between it and the Dubai Financial Market (DFM) in the summer has gone a good way towards improving liquidity, and NASDAQ Dubai is actually showing a healthy increase in values traded over the past year, with volumes down but by far less than on the other UAE markets.
In any case, both the company and potential investors were aware from the outset of the potential liquidity problem and still proceeded with the float.
If market conditions were as good as they could get in the circumstances, what else could have happened to derail the flotation? Pricing is one possibility. Perhaps the shares were just too expensive to justify investor enthusiasm.
That is a matter of opinion. Deutsche Bank, which organised the book-building exercise that determined the price, will no doubt stand by its valuation and point to the fact that the issue was subscribed - just - as evidence of sufficient investor appetite at the level of 80 US cents.
Others, however, point to more basic concerns. Could a company that made a profit of US$6 million (Dh22m) last year really be valued at more than $1 billion? In the heavily saturated mobile phone market of the Middle East - and the UAE in particular - did Axiom's growth prospects justify such a valuation?
But the fact the issue was subscribed seems to indicate that investor concerns on these issues were largely assuaged.
There were some worries about how the company was going to use the funds from the IPO. Axiom has some chunky debts on its balance sheet, as well as some indebted investors, and the proceeds would have been largely used to pay these down.
There is nothing wrong with that. It is entirely sensible, in a low-interest-rate environment, to refinance liabilities from cash proceeds, and Axiom would have been able to restructure its debts to obtain sensible terms from a position of cash strength. So, on balance, debt fears were not the decisive factor either.
Individually these concerns might have been discounted, but combined they added to an air of suspicion about Axiom. In the end, this aggregate suspicion was enough to get the flotation pulled.
Much has been made of the absence of retail investors from the issue, and the UAE market authorities really have to work out their basic attitude to small investors, especially with a privatisation programme by the Dubai Government in the pipeline.
Retail investors cannot guarantee the success or failure of a flotation. Compared with the big institutions, they are just too insignificant, and too far out of the information loop, to make a difference.
But, as the big privatisation programmes in Europe and elsewhere demonstrated, retail investors add a certain zest to the process that transforms it from being an investment event into a matter of economic, social and political importance. As multiple and spontaneous traders, they are also likely to add to volumes. This is especially true when the IPO involves a consumer-oriented business such as Axiom.
The decision to exclude retail investors from the Axiom flotation now looks a serious mistake. According to those involved in the process, the decision was taken by the Emirates Securities and Commodities Authority (SCA), which is not the regulator for NASDAQ Dubai but is often consulted by the UAE Central Bank - the ultimate regulator.
The Dubai Financial Services Authority (DFSA), NASDAQ Dubai's dedicated regulator, must sit down with the SCA to work out the lines of authority in this respect. Turf wars are in nobody's interest.
In particular, the two organisations have to harmonise and rationalise the rules for their respective bodies. It seems to make no sense at all for companies to be able to float just 25 per cent on NASDAQ Dubai but to be forced to sell a minimum of 55 per cent on the DFM.
The Axiom debacle will have been a useful exercise if it hastens the unification of the UAE's regulators and markets. A unified stock exchange in place of the current trio of organisations would have the critical mass and momentum to ensure better liquidity and volumes.
In the end, it was better to have pulled the Axiom flotation than to have pushed it through in the face of investor indifference and suffered in the after-market.
But UAE markets, and Dubai's in particular, cannot afford more embarrassments like Axiom.