Shares in major Dubai construction firm Arabtec have continued to plummet on Tuesday, falling by the maximum 10 percent allowed for a third session in a row, fuelling a broad and aggressive sell-off on the emirate's stock market.
Dubai's benchmark was down 8 percent at 12:50pm, heading for its biggest daily loss since last August, as almost all stocks decline, giving up early-session gains.
A number of other stocks are limit-down or very close, including developer Union Properties, contractor Drake and Scull and bourse operator Dubai Financial Market, while Emaar Properties was down 7.39 percent at 12:50pm.
Arabtec on Tuesday partly confirmed reports about layoffs at the company, which followed the resignation of its chief executive Hasan Ismaik last week. At the same time, the company made no comment on its strategic direction or on what could happen to Ismaik's 28.85 percent stake in Arabtec, the issues which investors say are their primary concern.
The Arabtec saga has hurt confidence throughout the market. Investors are also keen to take profits before the summer lull; Dubai's index remains up 19 percent year-to-date.
"Overall, the sentiment is still negative and the sell-off continues," says Julian Bruce, director of Western institutional equity sales at EFG-Hermes.
Arabtec's dramatic fall – the shares have halved in value since May – follow a string of bad news for the company, which started with major shareholder Aabar Investments, an Abu Dhabi state fund, cutting its stake in the company from 21.57 percent to 18.85 percent between June 8 and 11.
Following Ismaik's resignation, reports on Monday claimed Arabtec’s head of mergers and acquisitions, Shohidul Ahad-Choudhury, had been sacked, along with a significant number of other staff.
In a bourse statement on Tuesday, Arabtec moved to clarify that it had laid off a "limited number" of staff in order to improve productivity and reduce costs, adding that all its actions had been aimed at protecting shareholders' rights.
A source with knowledge of the matter told Reuters on Monday most of the people departing had either been hired by Ismaik or were perceived to be close to him, raising questions over whether the layoffs would hinder Arabtec's ambitious expansion plans, which include many billions of dollars worth of contracts in the UAE, Egypt and other countries.
Bloomberg News reported on Monday that the number of staff laid off was in the hundreds, but Arabtec said that number was incorrect.
Arabtec said its structure and administration remained strong, contrary to inaccurate rumours. However it did not comment directly on its business plans post-Ismaik, how the company would be managed, or what would happen to Ismaik's 28.85 percent stake in the firm.
Aabar, which now owns 18.94 percent and has considerable management influence on Arabtec, has declined to comment on its intentions.
