What does DP World’s delisting decision mean?
Almost 13 years after its IPO the Dubai ports and logistics company aims to be the world number one and doesn't want to be constrained by a short-term oriented financial market
DP World is to become a private company and delist its shares. Chairman Sultan bin Sulayem said that the ports and logistics industry worldwide is changing rapidly. To properly meet both the opportunities and challenges that this transition is creating, he said, requires a long-term approach. Too often this will be at odds with share price-oriented equity markets and Mr bin Sulayem said DP World does not want to be constrained from doing what is right because of short-term considerations.
Among local, regional and international investors there was fervent excitement over DP World’s initial public offering on what is now the Nasdaq Dubai exchange some 13 years ago. It was a transaction expected to super speed the UAE’s ambitions to be at the centre of the global trade landscape following Dubai’s acquisition of P&O two years earlier.
Looking back now, the sale of a stake in the ports operator to the public, raising $5 billion, did help make this goal a reality.
Today, beyond running ports and terminals across Europe, Asia, the Americas, Africa and Australia, DP World also provides the logistics on land and sea to get the cargoes it handles at these hubs to and from the buyer and seller.
It is also supporting these businesses by providing parks and economic zones for them to be based in.
DP World has grown to become the fifth-largest handler of container volumes in the world. The ambition now is to be number one.
In 2007, the company was valued at $21 billion and its shares were priced at what some believed was the top of the market. The trading volumes of its stock never really took off on what was then the Dubai International Financial Exchange, or DIFX.
Still, it is not saying goodbye to the rigours and disciplines of the capital markets completely. DP World still has some 20 bond and sukuk instruments which are publicly listed.
Rather, it has recognised that it has evolved into a bellwether for global trade and wishes to fully capitalise on the potential this position provides without hindrance.
The last two years have been a turbulent period for global trade demand with the US-China trade war, rising geopolitical tensions in the Middle East and now the coronavirus outbreak undermining sentiment. These, however, could be viewed as part of normal and immediate economic concerns that do not change the longer term need for greater investment, particularly in technology.
It is also right that any company, not just DP World, should be asking themselves if they should be publicly traded at all in 2020. Equity markets have changed a lot. Short-selling and activist investors are far more prevalent today than in 2007. Automated trading and computer algorithms hold sway now in a digital age for financial markets.
That’s not to say DP World may not list its shares again one day. When it does there is little doubt that there will be immense interest once again from investors across the world even if there is a temporary PR fuss made over the move to delist.
Updated: February 19, 2020 10:58 AM