Why is DP World listing its shares on the London Stock Exchange?
Since it floated on Nasdaq Dubai in 2007 (it was known then as the Dubai International Financial Exchange), DP World has not traded above the issue price of US$1.20. The reasons are disputed. Some think the shares were overvalued, others that the Dubai market lacks the liquidity for healthy trading of such a big stock. Much of DP World's life as a quoted entity coincided with the global economic downturn, which further clouded the valuation. But the shares are still below 70 US cents, and the company has decided that listing on the London Stock Exchange (LSE) will give it greater investment exposure and liquidity. This should lead to a higher market rating.
What is the timetable for the listing?
The company will ask shareholders for final approval to list the shares at the annual meeting on May 11. With the majority shareholder, Dubai World, in favour of the proposal it is inconceivable that permission will not be given. On May 19, DP World shares will be consolidated in a ratio of one new share for every 20 currently held. This is designed to make share valuation statistics, such as earnings and dividend ratios, are more meaningful in comparison to similar companies on the London market. If all goes to plan, and the proposal gets the green light from the UK listing authority, the shares should begin trading by the end of this month.
What form will the London shares take?
The LSE shares will be in the form of "depository interests" (DIs) - financial instruments with most of the attributes of ordinary equity. They are likely to be traded in pound sterling (DP World trades in US dollars on Nasdaq Dubai). It is unlikely that DP World will gain admission to the FTSE 100 list of companies, the index of the LSE's biggest stocks, which many investors use as a "tracking" instrument. Although, at about US$10 billion (Dh36.73bn), DP World easily qualifies on the grounds of market capitalisation, it is a non-UK registered corporation, with a majority state-owned shareholder, and so does not satisfy all the conditions for FTSE 100 inclusion.
What should shareholders do?
After the annual meeting, where approval is expected, the process is then pretty much automatic. For those holding quantities of shares not divisible by 20, the extra shares will be pooled and the value returned in cash. Investors can convert their dollar-denominated Nasdaq-listed shares into sterling-denominated DIs once they are listed in London.
Will the shares go up in value when they start to trade in London?
"That's the $10 billion question," says Mohammed Sharaf, DP World's chief executive. As with any investment decision, market forces will determine that. Some believe increased liquidity will lead to a rise in share price, others think the presence of a majority investor such as Dubai World will slow further rises. In any case, there is unlikely to be a "big bang" day when trading first opens.