Book building to be game changer for Qatar's capital market

The book building process, through which the market gauges the demand and price discovery of initial public offerings (IPO), is expected to be game changer for Qatar's fast developing capital market.This came in response to Qatar’s first book building exercise for Meeza’s IPO, whose book building period concluded on March 6.The book building system is fast becoming the most acceptable format among issuers and lead managers in the (Arab) region, sources said.Highlighting that the final pricing of Meeza's IPO was outside the latest price range; market sources said it is evident that book building process is going to be a game changer for the country's capital market, which is already eyeing developed market status.Seven qualified institutional buyers had subscribed to 37.41% of the IPO, with the book closing above the Qatar Financial Markets Authority (QFMA) minimum requirement of five qualified investors subscribing to at least 30% of the offering.Final pricing outside the latest price range is a testament of the effectiveness of the book building mechanism to transparently price the IPO based on supply and demand, considering market conditions and feedback received from qualified investors during the book building subscription period."This (Meeza IPO) would go long way in encouraging other entities, especially fundamentally strong, wishing to go public," a market analyst with a leading investment house said.Unlike the present system, where the demand could be assessed only at the time of closing of the subscription of IPO; the book-building route is dynamic as it estimates the demand as the book is built, sources said.The book-building mechanism is used in many global and regional markets to determine the share offering price by relying on qualified investors who have sufficient experience and knowledge and the necessary mechanisms for fair pricing of the security, a QSE spokesman said.Book-building is one of the mechanisms that the QFMA intends to work with as part of mechanisms for evaluating companies wishing to make public offerings of their shares to investors."The book-building is an efficient tool of price discovery. It is one of the missing blocks that the exchange needs to get into the developed market status,” an analyst with a leading global advisory firm said."The new procedures like book building and direct listing will attract more companies to the Qatari market,” QSE acting chief executive officer Abdul Aziz Nasser al-Emadi had told the media at the time of the listing of Beema early this year.