The shaky foundations of the most prominent builder in the United Arab Emirates have dented the country’s credibility. Shares in Dubai-based Arabtec, which helped erect the world’s tallest tower in the emirate, have more than halved since May 15, wiping almost $4.9 billion off its market value. The debacle is a warning to investors attracted by the UAE’s new emerging market status.
Arabtec’s slide began last month amid rumours of a rift between its two largest shareholders and accelerated earlier this month when Aabar, an investment fund of the Abu Dhabi government, cut its stake from 21.6% to 18.9%.
Arabtec has said that it’s implementing a “limited restructuring” but it hasn’t quantified that in any way. A cadre of senior executives has also left the company raising questions over Arabtec’s expansionist strategy in the past two years into heavy industry and oil and gas.
Aabar’s silence also raises questions about its commitment to the group.
Aabar, first disclosed a stake in Arabtec in 2012 and this helped the company secure a huge projects – including a contract to construct the Abu Dhabi branch of the French Louvre museum and a $40-billion contract to build one million new homes in Egypt. It’s now unclear how many of those projects will go ahead.