The abandonment of UAE classified ads business Dubizzle's IPO has highlighted the challenges facing Middle East ECM after a year of weak aftermarket performance that is in stark contrast to the boom of the past few years that made the region the sole bright spot in EMEA ECM.

"It's a complete disaster for the region," said a UAE-based investor, commenting on Dubizzle's listing that was expected to value the company at around US$2bn.

Fears of weak trading were a key factor in Dubizzle's cancellation, with investors drawing parallels to 2024's listing of delivery business Talabat, which has fallen close to 40% from its issue price, and construction business Alec Holdings, which has fallen below issue since listing earlier this month.

"They're pushing price too hard in the region and need to become more competitive," said the investor. "The ability to scale back expectations is difficult. There's a massive trend of deals being overpriced and they're promising too much."

A banker on the deal said Dubizzle had a number of specific issues that investors had struggled with, such as a wide discrepancy between its adjusted and reported figures and the desire for investors to value its UAE operations separately from the lossmaking Saudi business.

"We knew from the beginning [Dubizzle] was a bit of a different transaction and was always going to be led by internationals, given the sector, the fact it is a lossmaking company and wanted people to look at things in a certain way," said the banker. "It was never going to be 70:30 local to international and more likely the other way round. It was a test of whether the market is ready to make this work, and the answer is probably not."

While acknowledging investors would remain cautious next year, the banker said he is working on two stories that are very different to Dubizzle, with one in the early-look phase that is highly profitable with strong cashflow that would be easier to understand.

“We need some IPOs to come that perform better,” said a second banker on Dubizzle.

He pointed to Etihad Airways and Emirates Global Aluminium as 2026 candidates with the quality to rebuild confidence. “We also need the market to mature and people to understand not every deal will trade up and stay there,” he said.

"It's fair to say people are aware of volatility in the region and globally, and less likely to give the benefit of the doubt if it doesn't perform on day one," said the first banker.

Predicting the behaviour of investors, who come from a broad local ecosystem that includes family offices, sovereign wealth funds and high-net-worth individuals, has often been a challenge, with the recent IPO of Alec said to have suffered from heavy selling by an account that had been thought of as a long-term investor.

The UAE-based investor stressed the need for structural changes to make deals more appealing to international investors, both in terms of valuation and allocations, with many reluctant to commit to deals given a history of scaling back orders in favour of locals.

Bankers in the region have also expressed the need for more sophistication on the buyside locally and a move away from high order inflation and flipping stock in the aftermarket. 

"[The region] missed an opportunity," said the investor. "They had their moment in the sun and have not restructured enough."

Source: IFR