Abu Dhabi launches $1.3bn worth IPO fund to support SMEs

Abu Dhabi has introduced an initial public offering (IPO) fund worth $1.3 billion (Dh5 billion) to promote and support private enterprises to list on the local stock market.

Further, the new Abu Dhabi IPO Fund will act as a catalyst to strengthen Abu Dhabi Securities Exchange (ADX)’s position as a leading stock market. According to the statement, the fund will be overseen by the Supreme Council for Financial and Economic Affairs and managed by the Abu Dhabi Department of Economic Development (ADDED).

The fund would invest in five to ten private companies per year, with a focus on SMEs, and with a target ticket size of between 10 and 40 percent of the float. Further, the fund will aid private firms to grow and support them through the IPO process by offering liquidity and by promoting equity research.

“The Abu Dhabi IPO Fund will incentivize more private companies, including SMEs, to list, by providing liquidity and by building additional confidence around IPOs through the encouragement of additional private sector investment. It will also promote a shift from relying on debt financing to fostering greater use of equity instruments. By deepening financial markets and promoting an investment culture across the UAE’s economy, the launch of the Abu Dhabi IPO Fund will further strengthen ADX’s position as a leading stock exchange.”

The Abu Dhabi IPO Fund will work closely with local banks to utilize their expertise during the listing process. Further, it aims to add additional capital from private co-investors to improve the proposition for listing companies. The fund and private co-investors will hold the shares post-IPO for a reasonable period.

Related: Abu Dhabi’s ADX opens new trading floor to advance its ambitious growth plans