(Dec 10): Talabat Holding plc’s shares lost ground after the food delivery firm’s US$2 billion (RM8.84 billion) initial public offering (IPO) in Dubai, adding to a slate of recent disappointing debuts for listings in the Middle East.

The Delivery Hero SE unit closed 6.9% lower at 1.49 dirhams (RM1.79) after rallying as much as 7.5% earlier on Tuesday. The IPO priced at 1.60 dirhams apiece, which was at the top end of a marketed range. Delivery Hero lost as much as 12% in Frankfurt.

Tuesday’s weak performance came in spite of an IPO that offered an upsized 20% stake in the company on the back of strong demand from anchor investors, with some market participants pointing to high valuations. Delivery Hero raised close to 7.5 billion dirhams in an offering that was the tech sector and Gulf region’s largest for 2024, according to data compiled by Bloomberg.

Mohammed Ali Yasin, founder and chief executive officer of Oracle Financial Consultancy and Investments, said the IPO priced Talabat expensively at a price-to-earnings ratio of nearly 28 times. The benchmark Dubai Financial Market General Index trades at nine times forward earnings.

“The valuation of the business was on the higher side of global comparables,” said Ashish Marwah, director and chief investment officer at Neovision Wealth Management. “I would reserve an outright judgment for a few trading sessions to see if there is follow-through.”

Listings in the Middle East have typically offered stellar returns in early trading, including the debut of Saudi Arabian financial services firm United International Holding Co earlier in December after a US$264 million IPO.

Still, Lulu Retail Holdings plc’s shares closed flat in its Abu Dhabi debut last month, while Oman’s OQ Exploration & Production dropped 8% in its first day in October after raising a record US$2 billion. Both these deals were oversubscribed and continue to trade below the IPO price.

“The liquidity momentum in the IPO market has been weakening in 2024,” said Oracle’s Yasin. “With Talabat we can’t blame that drop on retail investors, as they were only allocated 5% of the total IPO. Institutional and professional investors are the ones who are dumping.”

Talabat’s market capitalisation of 34.7 billion dirhams, the equivalent of about US$9.4 billion, remains within a whisker of parent Delivery Hero’s €9.2 billion (US$9.7 billion) valuation.

The Persian Gulf has continued to be a busy hub for new share sales this year, with firms raising more than US$12 billion through IPOs, according to data compiled by Bloomberg. This included a slew of private sector companies from a variety of areas such as retail, financial services and health care, amid efforts by regional governments to deepen and diversify their capital markets.

Population growth in hubs such as Dubai has helped cement the performance of consumer-facing businesses.

Talabat operates across eight countries — the United Arab Emirates, Kuwait, Oman, Qatar, Egypt, Jordan, Iraq and Bahrain. It has cemented its position in the region helped by Delivery Hero’s acquisition of Indian firm Zomato’s food delivery business in the UAE in 2019 and online grocery platform InstaShop in 2020.

Emirates NBD Capital PSC, JPMorgan Securities and Morgan Stanley acted as joint global coordinators and joint bookrunners on the Talabat offering. Abu Dhabi Commercial Bank, Barclays, EFG-Hermes, First Abu Dhabi Bank, Goldman Sachs, ING Bank and UniCredit were joint bookrunners.

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