Saudi Aramco sets launch of biggest IPO on November 17

RIYADH  – Saudi Aramco said it would start taking bids from investors on Nov. 17 in a highly anticipated stock offering, as it released a prospectus that did not disclose the size of the sale or the pricing range.

The 658-page document said the final share price would be determined on December 5, a day after subscriptions close, in what is expected to be the world’s biggest initial public offering.

After years of delays and false starts, Aramco officials last week announced a share sale on the Riyadh stock market for the world’s most profitable company, which pumps 10 percent of global oil supply.

The prospectus, released just before midnight Saturday, said the state giant would sell up to 0.5 percent of its shares to individual retail investors but that it had still not decided on the percentage for larger institutional buyers.

Saudi investors appear keen on the prospect of owning a piece of the company, seen as the kingdom’s economic crown jewel, despite concerns over the future of oil and the firm’s valuation and governance.

The company said it had hired a host of international banking giants including Citibank, Credit Suisse and HSBC as financial advisors and book-runners.

In its push for transparency, the secretive company’s prospectus also highlighted risks including the potential for “terrorist” attacks and the possibility of antitrust legislation.

It also acknowledged that climate change concerns could reduce demand for hydrocarbons.

“Disclosure (and) transparency combined with the global research and analysis that it will provoke is in itself of major value to the kingdom and the company,” said Ali Shihabi, a Saudi analyst. 

However key details were missing from the prospectus, including the company’s valuation and how much Aramco expects to raise from the IPO.

“This lack of clarity in the prospectus shouldn’t alarm us as it’s a book building exercise,” said Nasser Saidi, another analyst.

“And let’s be clear Saudi will do whatever it takes to make this IPO successful because so much hinges on it,” Saidi told Bloomberg TV.

The share sale appears unlikely to see Aramco hit a $2 trillion valuation for the company that de facto ruler Crown Prince Mohammed bin Salman had initially hoped for. 

Investment research firm Bernstein estimates the valuation could fall within a range of $1.2 and $1.5 trillion.

Based on a $1.5 trillion valuation, a two percent stake sale would raise Aramco $30 billion. That would still make it the world’s biggest IPO, eclipsing Chinese retail giant Alibaba’s $25 billion listing in 2014.

Saudi Arabia is pulling out all the stops to ensure the success of the IPO, a cornerstone of Prince Mohammed’s ambitious plan to steer the economy away from oil by pumping tens of billions of dollars into a host of megaprojects and non-energy industries.

The government has reportedly pressed wealthy Saudi business families and institutions to invest, and many nationalists have labelled it a patriotic duty.

Aramco had initially been expected to sell a total of five percent on two exchanges, with a first listing of two percent on the kingdom’s Tadawul bourse, followed by a three percent listing on an overseas exchange.

But the firm has said there are no current plans for an international stock sale, indicating that the long-discussed goal of a second offering on a foreign bourse had been shelved for the time being.

Even for the domestic listing, there are reports the firm is struggling to attract foreign institutional investors, amid an uncertain outlook for the energy sector and questions over company disclosures and governance.

Norway’s sovereign wealth fund, the world’s largest, does not plan to invest in Aramco, a Norwegian official told AFP.

Investors are also concerned about geopolitical risks. The news of the listing comes just weeks after crippling attacks on the heart of Aramco’s facilities briefly halved its output as tensions spiked with Iran.

But China, the world’s top oil importer, may commit as much as $10 billion through sovereign wealth funds and other state-owned enterprises, Bloomberg News reported.

Aramco, a cash cow that catapulted the kingdom to become the Arab world’s biggest economy, does appear to hold enormous appeal for local retail investors.

Many Saudis appear to be tapping lenders and selling personal assets to raise money to invest in the share sale.

Aramco last year posted $111.1 billion in net profit. In the first nine months of this year, its net profit dropped 18 percent compared to the corresponding period of 2018 to $68.2 billion.