Saudi Aramco IPO's retail tranche oversubscribed with orders topping $10bn
The company will conclude its book-building exercise for the share sale on December 4
The retail tranche of Saudi Aramco's initial public offering is oversubscribed, with orders hitting 38.1 billion Saudi riyals (Dh37.31bn) by noon on Thursday, according to lead manager Samba Capital.
Retail investors subscribed for 1,191,586,430 of the shares offered at the top-end of the energy company's 30-32 riyal price range, the bank said in a note. One billion of the three billion shares set to be floated on Saudi Arabia's stock exchange, Tadawul, were up for grabs by individual investors, with the offer closing at midnight on Thursday. Final result will be announced on Friday.
In total, 0.5 per cent of the company's shares were offered to individual investors. Based on a price range, Saudi Aramco is valued at between $1.6 trillion and $1.7tn. Retail subscribers added 6.13 billion riyals above the amount required for full coverage, Samba Capital noted.
The retail demand was an indication of "the high level of confidence" in Saudi Aramco's investment proposition and the promising financial prospects of the company, Samba Capital's deputy chairwoman, Rania Nashar, said.
“The IPO results reflect the belief of the investing community and the Saudi population in the economic and strategic direction the kingdom of Saudi Arabia is taking," she added.
Saudi Aramco will conclude its book-building exercise for the share sale on December 4. Institutional investors from China are said to be considering up to $10bn in investment, according to Bloomberg, with the oil company also courting Gulf state investors through roadshows in the UAE.
Saudi Aramco, the most profitable commercial entity in the world, beating the likes of Apple, Google and Amazon, recorded a $68bn profit for the first nine months of the year. A debut $12bn bond issued by the company in April was more than ten-times oversubscribed.
The oil giant, which has one of the highest revenue streams in the world, accounts for one in every eight barrels of crude. In 2018, the company produced 13.6 million barrels per day of oil equivalent, including 10.3 million bpd of crude.
The company kicked off the IPO process on November 3.
Receipts from the sale will be channelled into the kingdom's sovereign Public Investment Fund, which has made some sizeable investments in recent years with stakes in technology firms such as ride-hailing app Uber, and electric car makers Tesla and Lucid.
The Fund is expected to use proceeds to help fulfill ambitious projects such as the $500bn futuristic economic free zone, Neom, and the Red Sea Project, a mega-tourism attraction, as Saudi Arabia opens up its tourism and entertainment sector.
The company expects to raise 96bn riyals from the IPO, with the domestic market accounting for 90bn riyals from, based on an estimate of 32 Saudi riyals per share, according to Riyadh-based Al Rajhi Capital. The remaining 6bn riyals is set to come from institutional investors.
Saudi Aramco would have a weighting in the Tadawul All-Share index of 9.1 per cent, on the assumption of the lower end of its price range, which should attract 3.7bn riyals of passive inflows from foreign investors in the MSCI and FTSE Russell Emerging Market indexes, according to the bank.
If valued at 32 riyals per share, it would have a total weighting of 9.7 per cent of the index and attract 3.9bn riyals of passive flows from foreign investors.
Updated: November 28, 2019 06:48 PM