Abu Dhabi’s stock market was long viewed as a minor Gulf exchange, garnering little attention outside the region — a reflection of the relatively small private sector in the oil-rich emirate that has long been dominated by the state.
But in less than four years its market capitalisation has almost quintupled to more than $650bn, a surge largely driven by the extraordinary rise of one stock — International Holding Company.
Chaired by one of the United Arab Emirates’ most powerful figures, Sheikh Tahnoon bin Zayed al-Nahyan, IHC has been transformed from a $200mn firm with interests in fish farms and real estate into a conglomerate with more than 400 subsidiaries and a market capitalisation of $236bn — bigger than Walt Disney, McDonald’s or L’Oréal.
Its weight rises to $324bn, or half the market, when combined with eight listed subsidiaries, including the $65bn Alpha Dhabi.
The transformation has mystified bankers and analysts, who have raised concerns about transparency and the blurring of the private sector, the state and the ruling family at a time when Abu Dhabi is seeking to use its oil windfall to burnish its credentials as regional finance hub.
“Five years ago the ADX’s biggest caps — then First Abu Dhabi Bank and Etisalat — were known to be transparent,” said one market analyst. “Now [two of] the largest stocks, IHC and Alpha Dhabi, are black holes . . . the market is less transparent than it was.”
Even the dynamics of the brokerages trading on the ADX have been upended, with another IHC-owned company, International Securities, now accounting for more than half the value of the market’s trades.
IHC’s expansion “seems to be a substantial step back in an institutional environment that previously seemed to become somewhat more transparent in the context of the region’s broader competition for foreign direct investment,” said one western academic who has advised Gulf governments on governance issues.
Despite being the largest and third-largest companies on the ADX by market value, neither IHC nor Alpha Dhabi are included in MSCI’s UAE index. MSCI’s criteria for including a stock in an index focuses not only on size but also the degree to which a company’s shares are freely available to purchase and how easy they are to trade.
Analysis of the trade in IHC’s stock shows it has often been bought and sold in large batches of multiple trades of a similar number of shares at the same time. Analysts say such trades appear pre-arranged and that it can be challenging for investors to buy IHC’s stock.
Big batches of the same volumes of shares traded simultaneously make up the bulk of IHC trades. From January 5 2020 to January 27 2023, this type of transaction made up two-thirds of IHC trades, according to an FT analysis of ADX data. By comparison, this pattern was observed for only 8 per cent of trades in Abu Dhabi Commercial Bank and 3 per cent of Etisalat, two other big ADX-listed stocks.
Ownership in IHC and Alpha Dhabi is highly concentrated and the proportion of shares readily available to trade is limited. IHC, which is 62 per cent owned by Royal Group, an entity controlled by Sheikh Tahnoon, has a free float of about 24 per cent, the company told the FT late last year. Its 2021 annual report said 18 shareholders owned 96.7 per cent of its stock. Alpha Dhabi’s report from the same year said 19 shareholders controlled more than 98 per cent of its stock.
Foreign investors — who have recently tended to be either US citizens or Emirati expatriates — make up a tiny share: 6 per cent in IHC and 3 per cent in Alpha Dhabi, according to ADX data.
There is no suggestion of illegal activity by IHC, which pledged $400mn to Indian billionaire Gautam Adani’s abortive share sale last week, or its subsidiaries but their expansion and activities have left bankers and analysts scratching their heads.
“If you want to get exposure to them you can’t because you can’t access their shares — it’s ridiculous,” said the market analyst. “It raises the question: why is all this happening? In a way, it’s no one’s business, but it does cast a shadow on the market. It changes the character in some ways but in others it doesn’t at all, because this activity is for friends and families, it seems. It’s not for the world at large to participate.”
IHC said its shares “are available to the market at a price for anyone” who wishes to invest, adding that it was “open, true and direct with information about our organisation, while adhering to market regulators’ governance and compliance standards”.
ADX said it “operates to the highest principles of corporate governance and transparency”, adding that listed companies “must adhere to comprehensive disclosure guidelines that are in line with global standards”.
IPOs and asset transfers
The state’s influence is never far away. Among the 13 companies that have listed on the ADX since 2020 is Abu Dhabi Ports, which is majority owned by ADQ, a sovereign investment vehicle that also controls ADX and is chaired by Sheikh Tahnoon.
Other recent IPOs of business that foreign investors do understand, include Borouge, a joint venture between state oil company Abu Dhabi National Oil Company and Borealis, and satellite communications company Yahsat, which is controlled by Mubadala, another state investment fund
But IHC and its subsidiaries have produced the most spectacular growth, through big transfers of assets from related companies, with IHC’s assets swelling from $215mn in 2018 to $54bn as of September 2022.
Alpha Dhabi’s assets jumped from $1.5bn in 2020 to nearly $13bn in 2021, the year of its listing, as it reported a surge in profits from $59mn to $1.4bn and a fourfold rise in revenue to $5bn. Its number of subsidiaries went from 16 to more than 100.
IHC says asset transfers from Royal Group, many for a nominal charge of one dirham, have been a key driver of its growth.
Alpha Dhabi — formerly known as Trojan — was previously wholly owned by Royal Group. In April 2021 a 45 per cent stake was transferred for “nil consideration” to IHC, which today owns 86 per cent of the company. More than 40 companies have been transferred from Royal Group, the majority at a nominal value of one dirham each.
Multiply, a communications company previously wholly owned by Royal Group, was also transferred to IHC for nil consideration on April 1 2020.
It now holds a driving school, wellness firms, beauty salons and a 7.3 per cent stake in Taqa, a utility company controlled by ADQ and the second largest stock on the ADX.
Assets rose from $26.6mn in 2020 to more than $3bn the following year, it said. Multiply acquired at least three companies in 2021 for nil consideration: Pal Cooling, Emirates Driving School and cosmetics group Bedashing.
Multiply, which listed in December 2021 and boasts a $13bn market capitalisation, is among the 10 largest stocks in the MSCI UAE index.
A broker’s boon
Along the way International Securities, an Abu Dhabi brokerage firm acquired by IHC in November 2019, also experienced spectacular growth — soaring to the top ranks of brokers serving the ADX.
Between 2018 and 2020 it handled 8 per cent of the value of trades and 9.8 per cent of the volumes. It now handles 64.2 per cent by value and 45.3 per cent by volume, according to ADX data. Analysts say the data suggests it buys and sells shares on the ADX in large batches — a pattern that fits with the trades in IHC shares.
The broker’s assets grew from $186mn in 2019 to $1.2bn in 2021, while revenues soared 216 per cent, according to IHC’s 2021 annual report.
IHC said International Securities “had fast, yet organic growth considering the number of IPOs  they have facilitated since 2016”, adding that the brokerage had attracted 25,000 “active clients”.
Steffen Hertog, a Gulf expert at the London School of Economics, said the web of companies was a reflection of “the continued deeper presence of the Al Nahyan family in the Abu Dhabi economy” compared to the ruling Al Maktoum family in Dubai.
“Which is not to say that the distinction between government and family business is crystal clear in the latter,” he added. “But there are fewer ruling family players and there is relatively more space for large non-royal private groups.”
Data visualisation by Chris Campbell and Patrick Mathurin