A Nobel Prize Winning IPO

By Mark DeWeaver.

I’ve often thought there should be a Nobel prize for corporate finance. It would go to the broker or investment bank that managed to place the largest IPO under the most unpromising circumstances. If there were such an award, I think Rabee Securities and its affiliate Melak Iraq would easily win this year after single handedly placing over US$ 1.25 billion worth of Asiacell shares. (There’s more on the Asiacell IPO here and here.)

This IPO presented a number of extraordinary challenges. Consider the enormous size of the offering, which was equivalent to almost a quarter of the entire ISX market cap. It never seemed possible that a block of shares this large could be entirely absorbed by local investors. Yet foreign investment banks decided to pass on the deal, which also made it seem unlikely that the shares could be placed abroad.

In the absence of a securities law, the IPO also had to be done without an underwriter. There was no guarantee that the entire offer would be taken up, nor could a single price be set for the shares based on investors’ bids. Instead, a minimum price was set (IQD 22) and the bids were simply fed into the exchange’s normal order-matching system. Investors had relatively little assurance that the price they paid would turn out to be a real market clearing price.

Yet despite these difficulties, Rabee and Melak have managed to pull off the largest IPO in the MENA region in the last five years. Congratulations to both for a job well done!

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