Saudis get a sliver of Aramco, the $1.7 trillion oil giant

Dubai: Saudi Aramco on Sunday pledged to the local public 1.5 per cent of the state-owned oil giant’s $1.7 trillion stock, putting to end months of speculation surrounding possibly the world’s largest IPO.

Aramco offered more details on the mammoth share offering it is planning for December, as it began its much-anticipated share sale and offered retail investors and institutions a piece in the world’s most profitable company through a listing on Saudi Arabia’s Tadawul bourse.

“The recent update to the IPO prospectus – not allowing US institutional investors to participate – shows the confidence, and the rush from Saudi and GCC investors to participate in the world’s biggest IPO,” said Mohamed Zidan, Chief Market Strategist for ThinkMarkets in Dubai.

“Saudi retail investors were waiting for this IPO and preparing their liquidity since the announcement of the IPO dates. So, the rush to participate to it was highly expected.”

Aramco would sell about 3 billion shares, priced between 30 riyals to 32 riyals apiece, which would give the initial public offering (IPO) a maximum value of 96 billion Saudi riyals ($25.60 billion). Pricing at the lower end of the range will raise $24 billion. Retail investors will be sold up to 0.5 per cent, which is about $8.5 billion worth of shares.

“The demand is high and supply is not big as was expected – it was expected to offer 2-3 per cent, however, only 1.5 per cent is offered, almost 96 billion riyals which is not considered big as all,” Zidan said.

“It is expected there will be 10 million retail investors subscribing to that IPO, which is two-thirds of what is offered for them, and the institutional will take the remaining third,” Zidan added. “That is the main reason Aramco has limited the participation to Saudi and GCC investors,”

In 2014, Chinese e-commerce giant Alibaba Group raised $25 billion in what currently is the world’s largest IPO. Alibaba is also now hoping to raise $12 billion through a secondary listing in Hong Kong, announcing it last week amid aggravating anti-government protests in the city.

The price would give Aramco an initial valuation of between $1.6 trillion and $1.71 trillion, which comes in shy of the kingdom’s $2 trillion mark set in 2016.

Saudi Aramco does not plan to market its domestic IPO abroad, Reuters reported on Sunday, citing people familiar with the matter, which suggests international roadshows may not take place.

Aramco was initially expected to sell a total of 5 per cent of its stock, about 2 per cent to be listed at home and 3 per cent on an exchange abroad.

Aramco will publish the final price and valuation on Dec. 5, with the listing date still to be announced.

The mega-offering comes as Crown Prince Mohammed bin Salman looks to diversify the oil-dependent economy by investing heavily in the development of non-oil sectors like tourism, health care and mining. It is widely expected to help strengthen the kingdom’s net asset position and raise its long-term economic growth.

The IPO has faced multiple delays reportedly amid concerns its finances would be publicly scrutinized. Drone attacks at its key oil facilities in September raised questions about security and threated to jeopardize its planned listing.

The bulk of the capital raised will go to the government or its sovereign wealth fund Public Investment Fund (PIF), S&P said in a note recently. Aramco kicked off the IPO on Nov. 3, revealing plans to list its shares on Tadawul, but provided no details on the size of the offering then. The institutional book-building will start on Sunday and go on until Dec. 4.