The curious case of the Aldar-Sorouh share price rise is one of the most bizarre I have encountered in 30 years of financial journalism.
For the shares of two prominent companies to rise exactly in tandem, by the same percentage amount to the identical monetary sum in one day is a huge coincidence.
For it to happen on two consecutive days is staggering. Aldar and Sorouh have been going up hand in hand, step by step, for the past week.
The chances of a comet colliding with the Earth tomorrow are probably less remote.
So it is appropriate that the Abu Dhabi Securities Exchange (ADX) has launched an investigation into what has been going on. The surveillance authorities there should probe every avenue of investigation. If ADX needs to call in the help of the Emirates Securities and Commodities Authority, it should not hesitate.
The difficulty ADX will face is that what has happened is very difficult to explain in terms of what might be called "normal" market abuse.
It simply makes no sense for an insider dealer or market manipulator - and there is no suggestion either of these abuses has taken place - to artificially crank the share prices to an identical level.
A true merger of equals is a rare event in the corporate world. Most of the time, what is described as a "merger" is in fact a friendly takeover of one company by another, with the agreement of the target company's directors acting on behalf of shareholders, at a price that has been agreed in advance after consultation between investment bank advisers.
No matter how "friendly" these proceedings, the bidding party usually ends up with a majority of the shares of the combined entity, as well as the lion's share of the executive jobs.
A sophisticated and transparent market recognises this straight away, and starts factoring in share values in anticipation of the eventual outcome.
If the market believes the deal is strategically good for the bidder, it will mark up their shares; if the price to be paid for the target is deemed acceptable, those shares will go up too.
Conversely, if the market doesn't like the deal it might mark down the predator shares and increase the value of the target.
The possible combinations are myriad, but never (and I mean never) have I seen the shares walk in lockstep like Aldar and Sorouh.
The companies have given themselves three months to work out the terms of the deal.
For the sake of shareholders, and the credibility of the ADX, Aldar and Sorouh must fall out of step long before then.
[ fkane@thenational.ae ]
