Abu Dhabi, UAETuesday 10 December 2019

Saudi Aramco IPO price range values company at up to $1.7 trillion

The company is offering individual and institutional investors 1.5 per cent of its shares at a price range of 30 to 32 Saudi riyals a share

Receipts from Aramco's share sale will be channelled into the kingdom's sovereign Public Investment Fund. Epa
Receipts from Aramco's share sale will be channelled into the kingdom's sovereign Public Investment Fund. Epa

Saudi Aramco is offering retail and institutional investors a 1.5 per cent stake in an initial public offering on the kingdom's benchmark Tadawul index, valuing the company between $1.6 trillion and $1.7tn (Dh5.9tn to Dh6.2tn) and making it potentially the world's largest listing to date.

The price range for the offering has been set at 30 Saudi riyals to 32 riyals a share, the company said on Sunday. Aramco will issue two hundred billion shares.

The final offer price will be determined at the end of the book-building period, which is December 4, according to the company. Individual investors will subscribe based on a price of 32 Saudi riyals, which is the top end of the price range.

If the final offer price is below 32 riyals, individual investors can, in respect to the difference between the highest price on offer and the final price, elect to have the surplus subscription amount refunded in cash as credit to their account or be considered for an allotment of additional shares, the company said.

Aramco, the most profitable commercial entity in the world, outshining the likes of Apple, Google and Amazon, recorded a $68 billion profit for the first nine months of the year and may eclipse the listing of China's Alibaba in 2014 that raised $25bn on the New York Stock Exchange. In April, Aramco issued a debut $10bn bond, which was hugely oversubscribed.

Aramco is the largest integrated oil and gas company in the world, producing 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, confirming its intention to float its shares on Saudi Arabia's Tadawul stock exchange, the Arab world's largest market. After the initial listing on Tadawul, Aramco is expected to carry out a secondary listing on an international exchange.

“Saudi Aramco's forthcoming IPO on the Saudi Stock Exchange could enable the sovereign to further strengthen its net asset position,” S&P Global Ratings said in a note. “And, if subsequently effectively deployed, the funds raised could be used to support longer-term economic growth in Saudi Arabia.”

The bulk of the funds raised are expected to to the government or the Public Investment Fund, potentially adding to the sovereign's already strong fiscal net asset position of 72.7 per cent of gross domestic product, S&P said.

The ratings agency also said "as a result of the recent bond and forthcoming equity offerings, there has been an increase in financial and operating disclosures", which is supportive for investors. "The IPO will also help to benchmark Saudi Aramco against regional and global peers."

The Aramco IPO is central to Riyadh's ambitions to transform the kingdom's economy. Funds from the share float are also expected to boost spending on Vision 2030 projects such as the $500bn futuristic economic free zone Neom and the Red Sea Project, a mega-tourism attraction. The country is aiming to open up its tourism and entertainment sector.

Updated: November 17, 2019 03:36 PM

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