Dubai-based developer Damac Properties’ $400m global depositary receipt (GDR) offering on the London Stock Exchange (LSE) could herald the increased use of GDRs by companies in the Gulf.

GDRs allow a foreign company to sell its shares globally while trading on the domestic market.

“Within the UAE, Qatar and Kuwait there is a lot of interest in GDRs, levels of interest we haven’t seen for some time,” Peter Gotke, vice-president, depository receipts, Bank of New York Mellon, based in Dubai, tells MEED.

There have been an increasing number of Gulf companies looking to list on London’s exchange with Abu Dhabi healthcare companies Al-Noor Group listing in June this year and NMC Health listing within the past year. Both companies went for a premium listing.

In contrast, Damac opted for a single-listed GDR, a decision that could reflect a growing trend among some regional corporates.  

Gotke says a GDR listing can often be a preferable option for companies, particularly those in the emerging markets. Russian and Egyptian companies have been particularly prevalent issuers.

“Egypt has been a really good poster child for the industry. The authorities there are happy with GDRs, as they have brought in a lot of foreign investment… When the local market closed, GDRs continued to trade in London – that was important for the issuers, the local market and the DR market,” he says.

Opting for a standard listing means the stock exchange will impose different disclosure requirements on a company. A standard listing means companies are excluded from certain indices such as the FTSE 250.

“All GDRs fall under the standard listing category, and trade on the international order book which is a massively liquid market,” Gotke adds.

“By opting for a single listing, Damac has the option to do a local listing at a later time or upgrade to a premium listing.”

The listing met with a slightly reticent response with the developer originally aiming to raise $500m in London, but later deciding to reduce the amount to $400m. The final offer price of $12.25 is at the bottom of the price range, potentially reflecting some investor apprehension around the recovering Dubai real estate market.

The US’ Citigroup and Deutsche Bank of Germany are joint bookrunners for the offer, with the investment banking arm of Saudi Arabia’s Samba Financial Group and Moscow-headquartered VTB Capital acting as co-lead managers.