| Kippreport.com

Axiom IPO collapse is bad news

December 8, 2010 12:01 by Samuel Potter

“It’s the first IPO for almost two years, and it will tell us an awful lot about the strength of the recovery.”

With those prophetic words Kipp began a piece last week entitled ‘Why the Axiom IPO matters.’ Well, now we have our answer: The Axiom IPO has been called off, which suggests that the strength of the recovery is, at the very least, questionable.

A company statement announcing the decision to cancel the offering said: “While there were sufficient orders to fully cover the IPO book at the price range, primarily due to demand from high quality international investors in Europe and the U.S., there were widespread concerns about market conditions and liquidity.

“The board has therefore decided to withdraw the offer at this juncture to protect current and future shareholders of Axiom.” Plans to list on NASDAQ Dubai were also cancelled.

Most analysts were surprised (to a degree) by the cancellation. Axiom did attract enough interest to be fully subscribed (although bankers were reportedly still chasing investors in the hours leading up to deadline), with a valuation within the proposed range. But that valuation was on the extreme lower end of the range, and according to the National that lack of interest and the low price had Axiom worried that trading beyond the offering could be poor.

Reaction to the news has been relatively muted, perhaps because the markets knew the IPO was ambitious. As paper observes, the volume of shares traded in each of the UAE’s three bourses has fallen by more than half in the last year. The paper’s own research puts the Dubai Financial Market down 65 percent, while the Abu Dhabi Securities Exchange and NASDAQ Dubai are each down 52 percent. This general lack in liquidity made Axiom’s play risky, and ultimately caused its downfall. Some believe the company’s decision to exclude retail investors from the sale only increased the risk, as retail traders make up a large segment of UAE volumes.

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