Abu Dhabi, UAETuesday 12 November 2019

9 things you need to know about the Saudi Aramco IPO

The Capital Markets Authority approved Saudi Aramco's anticipated listing on Sunday. We examine what's next in the run-up to what could be the biggest IPO ever

Saudi Arabia has finally greenlighted the much-awaited listing of shares in state oil giant Aramco on the domestic exchange, Tadawul expected before year-end. The share offering slated to be the largest and expected to eclipse that of Alibaba's listing, has intrigued global investors and gripped banks and financial advisers. On Sunday the oil behemoth offered some clarity on its mammoth IPO exercise. Here are the highlights:

What percentage of shares is Aramco likely to offer and at what price?

The valuation will be determined after the conclusion of the company's roadshows and book building exercises, which will happen over the forthcoming weeks, according to Saudi Aramco chairman Yasser Al Rumayyan.

Who is allowed to invest in Saudi Aramco's IPO?

Saudi citizens, GCC nationals and foreign institutional investors can participate in the IPO. Saudi family businesses and individuals have been encouraged to participate in the offering with the company promising a bonus share for every 10 shares held for 180 days, with a maximum limit of 100 shares.

What percentage of shares has been allocated to foreign institutional investors versus local investors?

The percentage of international versus local investors has yet to be determined, according to Mr Al Rumayyan. The percentage will be announced following the company's roadshows and book building exercises.

When is the company's prospectus likely to be published?

The company's prospectus will be published on November 9, according to chief executive Amin Nasser.

How profitable is Saudi Aramco?

Saudi Aramco is the world's most profitable company, reporting a net profit of $46.9 billion (Dh172.3bn) for the first half of 2019, higher than that of Apple, Google and Amazon. The company's revenue for the first half was an impressive $163.9bn. Aramco also has a higher operating cash flow, free cash flow as well as higher Ebitda than each of the Big Oil companies. The company reported a net income of $111bn last year.

What is Aramco's dividend policy likely to be?

Saudi Aramco plans to pay a dividend of $13.4bn for the quarter ending September 30 and will declare an interim dividend of a maximum $9.5bn pending approval from its board. The company's board also intends to declare aggregate ordinary cash dividends of at least $75bn next year. The government also plans to forgo its quarterly dividend over the next five years, if required to free up cash for other shareholders.

Where is Aramco likely to list next?

The government's priority is for a local listing first, with other options considered "in due course", Mr Al Rumayyan said on Sunday. Saudi Aramco has not specified possible foreign exchanges that are under consideration for a second listing. Tokyo and Hong Kong could be prime locations for a listing as Gulf oil companies pivot towards Asia.

When is the domestic listing likely to happen?

Early December may be the earliest as the company is completing the process over the coming weeks to determine the price range.

How is the IPO likely to impact the Saudi economy?

Aramco's IPO will likely pave the way for more "marquee privatisations", according to Bassel Khatoun, managing director, frontier and Mena, Franklin Templeton Emerging Markets Equity. The Aramco IPO is a key pillar of the Saudi state's Vision 2030 policy of diversification which may raise as much as $200 billion over the coming years, added Mr Khatoun. The proceeds from the IPO will be used by the kingdom's sovereign Public Investment Fund to be re-injected into the economy. The listing is also likely to push other Saudi entities to open up their books and be subject to global practices of governance, according to Ihsan Buhulaiga, principal consultant at Joatha Consulting Centre.

Updated: November 7, 2019 11:29 AM