Sovereign Fund Sales Spark Hopes For More

Abu Dhabi's IPO market is heating up.

Abu Dhabi towers.

Al Yah Satellite Communications, a company owned by Abu Dhabi sovereign wealth fund Mubadala, raised around $730 million after selling a 40% stake in an initial public offering. The IPO values the company, widely known as Yahsat, at roughly $1.8 billion and ends a four-year hiatus of initial public offerings in the oil-rich emirate. Mubadala’s evolving investment strategy has stoked optimism that stakes in other portfolio companies could soon be sold.

Recent reports say Emirates Global Aluminum may follow Yahsat, while Abu Dhabi National Oil Company (Adnoc) could list its drilling business and a fertilizer joint venture. Adnoc listed its distribution arm in 2017, raising around $850 million in Abu Dhabi’s largest listing to date.

“The IPO represents the first-ever IPO of a Mubadala subsidiary since its inception and creates a new platform and route for further value creation,” according to a prepared statement. Mubadala, which has $234 billion in assets under management, according to Global SWF, retains a 60% stake. Analysts say the comments signify Abu Dhabi’s determination to maximize investment returns as SWFs chase yield amid an imminent energy transition.

Yahsat allocated 975,908,106 existing shares for the offering, priced at 2.75 UAE dirhams ($0.75) per share, after a successful book-building process. Yahsat’s market capitalization will be around AED6.7 billion, or approximately $1.8 billion. The offer drew global institutional investors, and was many times oversubscribed.

“We are dedicated to ensuring we meet and exceed investor expectations by expanding our geo-graphical reach, while innovating and driving new technologies to meet the local, regional and global demand for reliable satellite connectivity and solutions,” says Ali Al Hashemi, Yahsat’s CEO.

Emirates Investment Authority, another Abu Dhabi SWF, exercised its preferential right to sub-scribe to 5% in the offering. The offering was declared shariah compliant by the Internal Sharia Supervision Committee of HSBC Bank Middle East.

Yahsat shares commenced trading on the Abu Dhabi Securities Exchange on July 14, jumping more than 10% in early trading thanks to pent-up investor appetite.