Monday, January 11, 2010

But sir, we LOST money on Arabtec! If we give back the losses like the Abdullah brothers plan to give back their gains can we also go free?

The DFM is conducting an investigation into “abnormal price movements” in the shares of Arabtec. It seems that the rumor about the Arabtec deal got out and traders took the stock higher, some 25% higher in three days. Aabar denied the rumors and Arabtec said they had no idea what was driving the stock. As it turned out sure enough the rumors were true as I’m sure the people who were buying the shares knew. Unfortunately for them they assumed that the takeover would happen as is customary: at a substantial premium to the current price. Instead, it came in at a substantial discount so anyone who bought shares in Arabtec on knowledge of the Aabar acquisition actually lost money. D’oh!

This is particularly interesting in light of the treatment of the Abdullah brothers who in a series of "unauthorized transactions" took over a hundred million dollars from the shareholders of Damas and invested it in their own names in Dubai real estate. This massive fraud has provoked nothing more than “close monitoring” from the appropriate regulatory authority. And now, since the brothers Abdullah have agreed to give back their gains (someday) or else give over shares (which the current holders cannot receive) there seems to be no further effort on the part of the authorities to pursue actions against the fraudsters. Perhaps if the Arabtec inside traders agree to give back their losses they can also escape regulatory scrutiny.

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