A Guide For Listing Your SME On The Nasdaq Dubai Growth Market
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The Nasdaq Dubai Growth Market for SMEs, a new market designed to support small and medium-sized companies under the umbrella of Nasdaq Dubai that was recently launched by HH Crown Prince of Dubai His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, is certainly a milestone for the UAE economy.
The main requirements for SMEs to get listed in the Growth Market of the Nasdaq Dubai is that their value, as it results from at least one year operating history (getting listed to the main market in Nasdaq Dubai requires at least three years’ operating history) and as accounted under the IRS accounting standard, does not exceed US$250 million. Their market cap cannot exceed $500 million for three months in a row in order to still be considered an SME and be listed in the Growth Market.
SMEs can be listed by selling as low as 25% of their shares. Of course, the amount of shares to be sold on the market will depend on the funding needs of the owners and the target investors, as some of them might like to see more capital fluctuating on the market so as to have a deeper exchange liquidity.
Ongoing requirements for the owners of the listing SME will be to hold their non-floated shares for at least 12 months and they are prevented to buy back their shares for at least two years. They will also have substance requirements, like engaging on an ongoing basis with a compliance adviser to prepare the prospectus and all documentation and forms for the filing and consult on the ongoing compliance with the listing rules. They will also have to honor fees to file the prospectus and an annual fee, both in the range of $10,000, which is very competitive.
Should a company not be ready to access the market, due to insufficient operating history for example, there is the possibility to join the Private Market sector of the Growth Market, with company shares held at Nasdaq Dubai to boost investor confidence and let the company get acquainted with the exchange environment.
The overall compliance process of applying for the listing and safeguarding ongoing requirements will be driven through listing advisors which are being selected by the Exchange among professionals with specific experience in the field of accessing exchange listing.
Besides the prospectus to be filed to the exchange, which will be drafted by the advisors on the base of the information provided by the company and its officials, I tend to believe that a fit and properness assessment of the involved shareholders and officials and a deep analysis of the operations and finance flows, with particular reference to the existing level of leverage and to the cash flow, will be carried out to understand the suitability in reference to the listing option and to the possibility of success of the consequent IPO.
This is a great step towards leveraging the Dubai jurisdiction, its reliability, and its international standing and reputation to boost the SME growth, facilitating access to the great amount of liquidity seeking to be employed to diversify investment portfolios.
Once again, the vision of the UAE leadership is leading the way in the region and beyond.
By being listed on the Nasdaq Dubai Growth Market, SMEs get a cost effective way to finance their growth while keeping the full control of their business in the hands of the founders, unlike for example accessing liquidity via venture capital funds. SMEs are often strongly engaged into innovative fields, where the vision of the founders and early managers is one of the most important aspects for the consistency of the strategy and ultimately its possibility of success, hence the focus on requiring the lockup period for the owners of the companies as mentioned above.
One important aspect to consider is that, whether this is a great opportunity for local SMEs and for those willing to establish in the region, listing is open to international companies wishing to get listed in an exchange within a reputable jurisdiction. Any good, well-conceived, well-managed business idea will have the possibility to tap into very large pools of liquidity, ensuring cost effective founding, creating diversification opportunities for investors seeking high growth potential and creating a reliable exit strategy for early investors.
The important feature will be to establish and maintain a sound, rigorous yet cost effective listing and trading environment, by making sure that also the advisor will be willing and able to provide their professional service accordingly.