Abu Dhabi’s IHC May Miss Out on Inflows Over Lack of Free Float

(Bloomberg) -- The second-largest listed company in the United Arab Emirates may miss out on inflows worth millions due to lack of clarity over its free float. 

International Holding Co. is eligible for inclusion in the UAE standard Index, potentially triggering $900 million of passive inflows, CI Capital said on Monday. Earlier this year, Arqaam Capital said it sees a low probability of the company joining the MSCI and FTSE emerging markets benchmarks, which could trigger $670 million of flows.

IHC’s opaque ownership structure makes it hard to define free float, reducing the stock’s probability of being included in the MSCI gauge. Its second-biggest shareholder is Royal Group, a company led by the UAE’s national security adviser, Sheikh Tahnoon Bin Zayed Al Nahyan -- who is also IHC’s chairman. The biggest individual shareholder, Pal Group of Companies LLC, is a subsidiary of Royal Group. Together, they own more than 70% of IHC. 

The index compilers don’t consider IHC’s free float to be high enough to merit inclusion, Ahmed El Difrawy, head of EFG’s data and index research said. The implied free float was 2% according to their financial statements from two years ago, and they haven’t disclosed a change since, he said.

Morgan Stanley said in August it expects $770 million to flow in if the stock is included in MSCI’s EEMEA Standard Index, but that would depend on the company providing more disclosure on its ownership. “We continue to see its inclusion with a low probability for now,” they said at the time.

Still, history shows that expected flows don’t always materialize after MSCI upgrades. From Pakistan to UAE, MSCI’s upgrades have often been followed by sell-on-fact moves.

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