Saudi Aramco eyes up to US$1.7 trillion in initial public offering valuation
- Figure is short of the US$2 trillion target set in 2016
- Aramco seeks as much as US$25.6 billion by selling a 1.5 per cent stake
Saudi Arabia put a preliminary valuation on its state-owned oil giant Aramco of between US$1.6 trillion and US$1.71 trillion, short of the US$2 trillion target set by Crown Prince Mohammed bin Salman in 2016.
Aramco is seeking as much as US$25.6 billion by selling a 1.5 per cent stake. The company would raise US$24 billion if the deal prices at the lower end – just shy of the US$25 billion raised by Alibaba Group Holding – currently the world’s largest IPO. (Alibaba is the parent company of the South China Morning Post.) With one third of the deal reserved for Saudi retail investors, Aramco will rely heavily on the local market.
The price range will be 30 riyals to 32 riyals per share.
Aramco will publish the final price and valuation on December 5.
The listing date for the Aramco shares has yet to be announced.
It has said it will not make the offer in the US, Australia, Canada or Japan.
Saudi Arabia has been pulling out all the stops to ensure the IPO – key to the crown prince’s plans to diversify the economy – is a success. It has cut the tax rate for Aramco and is promising a hefty dividend. The kingdom has also negotiated commitments from its wealthiest families to invest in the offering as many international money managers seem ready to pass.
“We expect a decent cover in the range of 2x-3x over-subscription for this size,” said Aarthi Chandrasekaran, a portfolio manager in Abu Dhabi at Shuaa Capital. “From a retail perspective, assured bonus shares and fixed dividend will support the stock price in the secondary market, not to forget the passive funds flow that follows in few weeks after the listing.”
Still, valuation has been a sticking point ever since the crown prince first floated the idea in 2016. Aramco has faced a delicate balance by pushing the valuation as close as possible to $2 trillion – a figure that is been met with scepticism from many investors – while making sure it’s attractive to potential Saudi buyers.
Among those considering sizable purchases are the Olayan family and Prince Alwaleed bin Talal, the billionaire investor who was held for several weeks in Riyadh’s Ritz-Carlton Hotel during the 2017 crackdown on corruption.
Proceeds will be transferred to the sovereign wealth fund, which has been making a number of a bold investments, plowing $45 billion into SoftBank Corp.’s Vision Fund, taking a $3.5 billion stake in Uber Technologies Inc. and planning a $500 billion futuristic city.
Here are key details:
Institutional book-building period: November. 17-December 4.
Retail subscription period: November 17-November 28.
Targeted percentage of shares allocated to individual investors will be up to 0.5 per cent of shares.
Refund of excess subscription amount to individual investors: December 12.
Aramco earned net income of $68.2 billion in the first nine months compared with $83.1 billion a year ago. Revenue slipped to $217 billion from $233 billion.
