| Kippreport.com

Why the Axiom IPO matters

November 28, 2010 1:04 by Samuel Potter

In an ideal world, the economic system would be based solely on the numbers. But it’s not. Instead, we imbue it with all of our very human concerns, like worry and fear. For that reason, confidence is a major factor in economic strength.

That’s why the fact Axiom (Dubai-based mobile handset company) is launching an IPO matters. It’s the same reason the General Motors IPO in the States was such a big deal: These are perfect indicators of confidence.

First of all, the very fact that IPOs are taking place at all is a positive thing. A company undertakes an Initial Public Offering (sells stock to become publicly held) when they need to grow. The IPO helps them raise a lot of cash fast, which they can invest in the workforce and equipment (or use it to reduce debt). A company will only undertake an IPO when it is confident in its future.

So Axiom is confident, and this is good news.

But the company must also be confident in its circumstances and environment. That means the wider economy. It must believe that there will be significant demand in the market for people to purchase its shares, and there will generally only be demand if the economy is confident and positive.

So Axiom believes the market and investors are confident, and this is also good news.

As the IPO goes ahead (expected to start around December 9), the accuracy of Axiom’s judgment will become clear. This is the first IPO in the UAE for two years, which should give you some idea of the level of confidence since 2008. A well received IPO would suggest we are finally turning a corner.

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