Abu Dhabi launches USD1.4 billion IPO fund to support SMEs

Abu Dhabi’s Supreme Council for Financial and Economic Affairs launched a AED5 billion (USD1.4 billion) IPO fund designed to strengthen the Abu Dhabi Securities Exchange (ADX) as a leading stock market and to support the private sector to contribute to Abu Dhabi’s sustainable economic development.

The fund will invest in five to 10 private companies per year, with a focus on small and medium enterprises (SMEs), and will have a target ticket size of between 10% to 40% of an IPO float. Managed by the Abu Dhabi Department of Economic Development (ADDED), the fund will assist private companies through the IPO process by providing liquidity and promoting equity research.

The IPO fund will work closely with local banks to leverage their expertise through the listing process and will aim to add additional capital from private co-investors to enhance the proposition for listing companies. The fund and private co-investors will hold the shares post-IPO for a reasonable period, said the statement.

Mohamed Ali Al Shorafa, chairman of ADDED and ADX, said the Abu Dhabi IPO Fund would incentivise more private companies, including SMEs, to list, by providing liquidity and by building additional confidence around IPOs through the encouragement of additional private sector investment.

“The fund will also promote a shift from relying on debt financing to fostering greater use of equity instruments. By deepening financial markets and promoting an investment culture across the UAE’s economy, the launch of the Abu Dhabi IPO Fund will further strengthen ADX’s position as a leading stock exchange,” Al Shorafa said.