TNI Report finds that Founder Shares cause Market Overhang

Abu Dhabi, UAE, 27 February 2007: The National Investor, one of the leading investment houses in the region, released yesterday its Market Insight entitled “Founder Shares causing market overhang?” The purpose is to list all companies which will be subject to Founder Share lock-up expirations in 2007/08, as well as to assess the timing and stock market impact of such events.

According to the TNI report, the current UAE regulation demands, in most cases, that a company going public lists at least 55% of its capital. The remaining, privately-held 45% must belong to a special type of investors called “Founders”. The latter are meant to be core long-term shareholders, hence the regulatory lock-up on their stake, which spans two Ordinary General Meetings (OGM’s) post-IPO – roughly two years. Considering the significant size of any founding stake, the expiration of the lock-up presents an opportunity for investors – even strategic ones – to sell at least some of their shares and to take some profits. In addition, the past year of consolidation and stock market losses has left many investors hungry for capital gains. “We believe the opportunity of cashing-in on some of the substantial upside provided by Founder Shares will not be missed,” the TNI report said.

In 2006, the Founder Shares of Amlak expired, but this event had minimal impact on the stock as the main founding shareholder is a strategic trading partner: Emaar, who did not sell out. This year, no less than five companies will “free” their Founders, representing a total, aggregate amount of about AED 7.1bn that can possibly flow back to the market. This is roughly 1.2% of total UAE market capitalization, a large number by any standard. “The purpose of this note is to list all companies which will be subject to Founder Share lock-up expirations in 2007/08, and to assess the timing and stock market impact of such events. Our general conclusion is that any flow-back in the currently weak market environment should be interpreted as a potentially negative event for listed companies, and could come in the way of any share price appreciation,” pointed out TNI’s Director of Securities Mr. Amer Halawi. 2007 lock-up expiration candidates are: Aabar, Aldar, Arabtec, Aramex and Finance House.

About The National Investor: The National Investor (TNI) is a privately owned regional investment and merchant banking group. The firm comprises seven strategic business units covering investment and merchant banking, private equity, asset management, real estate, investment research, principal investments and client advisory. In addition, the firm has an associate company, GNSC, which provides brokerage services as a registered member of the Abu Dhabi Securities Market (ADSM) and the Dubai Financial Market (DFM).