The chief executive of major Dubai construction firm Arabtec resigned on Wednesday after a tumultuous six weeks during which the company’s share price plunged as much as 50 per cent and a major backer of the firm cut its shareholding.
The Arabtec saga dragged down the Dubai stock market and illustrated the opaque nature of corporate affairs in the region, as investors were left uncertain about the fate of one of the Gulf’s biggest and fastest-growing contractors.
In a statement on Thursday, Arabtec said Hasan Ismaik was resigning from his posts of CEO, managing director and board member because of his “personal work and investment preoccupations”. It thanked him for his contribution to the company.
It also confirmed the appointment of Mohamed Al Fahim, a board member from Abu Dhabi’s state-owned International Petroleum Investment Co (IPIC), the parent of Aabar, as Arabtec’s acting CEO for an unspecified “temporary period”.
Forbes magazine said this month that Ismaik, 37, had become the first Jordanian billionaire – and the third-youngest billionaire in the Middle East – because of his holdings of Arabtec shares. It estimated his net worth at $1.4 billion, adding that it was not clear where he had raised the money to buy the shares.
Arabtec, which saw its revenues jump 30 per cent to $2 billion last year and says it has about $59 billion of projects in the pipeline, is politically important because it has become a tool of the United Arab Emirates’ economic diplomacy.
Earlier this year the company won a $40 billion deal to build one million homes in Egypt over coming years, part of the UAE’s efforts to support new Egyptian President Abdel Fattah al-Sisi against Islamist forces.
Arabtec shares closed 1.9 per cent higher in Dubai on Wednesday after news of Ismaik’s resignation emerged, in a sign that investors hope his departure may stabilise the firm.
Arabtec’s fortunes began to look up in 2012 as a major shareholder, the deep-pocketed Abu Dhabi state fund Aabar Investments, a unit of IPIC, increased its involvement in the firm and began steering business its way.
In February this year, for example, Arabtec said it had signed a $6.1 billion memorandum of understanding to build 37 mixed-use, residential and hotel towers for Aabar in Abu Dhabi and Dubai. Arabtec’s share price more than tripled in the first five months of this year.
But the stock then began plunging amid rumours – which Ismaik publicly denied – that the manamagements of Arabtec and Aabar had disagreements.
The stock’s slide accelerated between June 8 and 11 as Aabar cut its stake in Arabtec to 18.85 per cent from 21.57 per cent. Aabar declined to comment on its intentions, but investors worried that its commitment to Arabtec might be waning.
Adding to the mystery was Ismaik’s own buying of Arabtec shares. In late May, Arabtec said Ismaik had raised his stake to 21.46 per cent from 8.03 per cent; on Sunday this week, bourse data showed his stake had risen further to 28.85 per cent.
In a brief interview with Al Arabiya television on Wednesday, Ismaik said he was leaving Arabtec because he wanted to look after his own business. He also said he would consider selling his Arabtec stake if he received an attractive offer.
Major questions surrounding Arabtec, including its future onwership and business strategy, were expected to be discussed at Wednesday’s board meeting, but it was not clear whether they would be resolved.
“I just hope that things settle down,” said Sanyalak Manibhandu, manager of research at NBAD Securities, one of the UAE’s top brokerages.
“The company has to assure investors that the strategy they’ve built up since the end of 2012 remains in place, or if it isn’t in place what changes will be made. Investors need to know what’s going on.”