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Posted: February 4, 2008
Nano IPO Is Big News For The DIFX
(Nanowerk News) The $100m initial public offering of Nanodynamics on the Dubai International Financial Exchange is the first listing of a US company in Dubai. But this looks to be the start of a trend as US firms turn their backs on their own markets in search of higher valuations on the DIFX.
'This is one of a chain of IPOs from the US that we have lined up for the DIFX,' said group chief executive officer of co-lead managers Daman, Shehab Gargash.
'All the companies have been specially selected by us for the quality of their management and business models. We want to be ahead of the business cycle in promoting promising companies and not late like in the dot-com days.'
Nanodynamics will become the first of these companies when its shares are listed on the DIFX next week. The IPO has been via a placing with half the shares going to US institutions led by Fidelity, and the balance to regional institutions and high net worth investors.
The 9,100,000 shares have been priced at $11 and Daman forecasts a $30 target price in 12-18 months, and expects a lively aftermarket when retail investors can buy the stock for the first time next week.
Interestingly Nanodynamics, a New York based firm dedicated diversified technology and manufacturing using nanotechnology, has chosen the DIFX for its IPO over a listing on the giant Nasdaq stock market. Why has it done this?
'The main clients for this technology are not in the US, and we value the technology of the DIFX platform,' explained co-lead manager Global Crown Capital CEO Rani Jarkas speaking on behalf of Nanodynamics. 'We are convinced this will be an important and beneficial listing for the DIFX which represents a good play on Asia and the Middle East'.
In other words, Nanodynamics is likely to secure a better shareholder base and higher market capitalization through a listing in Dubai. And in a sense this is nothing different from Citi going to Abu Dhabi recently to seek new capital. Going where the money is makes good sense, especially in unstable global capital markets.
Will Nanodynamics stock prove a good buy for local punters? Daman has a strong reputation to protect in Dubai and is unlikely to be promoting a dog. Indeed, Nanodynamics is an acknowledged leader in its field of alternative technology with half of its 150 staff being scientists or holding PhDs.
But this is a loss-making company with no profit track record. Revenues are forecast to rise from $40m this year to $80m in 2009 and $180m in 2010 with a $1.38 per share profit. But profits are not anticipated before 2009.
After the IPO the market capitalisation of Nanodynamics, with around a third of its shares in free float, will be $475m. Some might argue that this is quite a market capitalisation for a company at such an early stage of its life, with 'negative profits' as the stock broker jargon puts it.
However, if such firms get a good reception on the DIFX then it looks like there are going to be a stream of listings crossing the Atlantic and heading to Dubai.