Aramco retail offering fully covered with one day to go
DUBAI: The retail tranche of Saudi Aramco’s initial public offering (IPO) is fully covered with one day to go after 3.7 million investors applied to buy shares in the world’s biggest oil producer.
The subscription reached 32.6 billion riyals (Us$8.7bil), lead manager Samba Capital said in statement. A third of what’s likely to be the world’s largest share sale has been reserved for retail investors, who’ve been targeted by a country-wide advertising campaign and offered larger-than usual loans to finance purchases.
There may be a last-minute surge before today’s final deadline for applications, but so far the share sale hasn’t been as well subscribed as some other IPOS in the counrty.
The book for National Commercial Bank’s 2014 Initial public offering was covered 23 times over.
In 2006, 10 million Saudis, about half the kingdom’s adult population, applied to buy shares in the local unit of the Middle East’s biggest property develop, Emaar Properties PJSC.
The Saudi government plans to raise more than Us$25bil by selling a 1.5% stake in the company at a valuation of between US$1.6 trillion and US$1.7 trillion. Of that, 1% is earmarked for institutional investors and the rest for Saudi retail buyers.
The Aramco IPO, a central element in Crown Prince Mohammed Salman‘s plan to modernise the kingdom’s economy, will rely almost exclusively on local money after international investors balked at the valuation.
Many of the richest Saudi families have been pressed to invest, including some who had members held in the Riyadh’s Ritz-carlton hotel during the corruption crackdown in 2017.
Aramco is still seeking to drum up support from institutional investors in the region, making pitches in Dubai and Abu Dhabi this week. Abu Dhabi plans to put as much as Us$1.5bil into the offering, while the Kuwait Investment Authority is considering a potential investment, according to sources. Institutional book-building closes on Dec 4, before the IPO’S final pricing the next day.
Earlier this week, Samba said the institutional tranche of the IPO was already 90% covered.
The banking system is also being used to boost demand. The Saudi Arabian Monetary Authority is allowing smaller retail investors to borrow twice their cash investment, double the leverage limits the regulator normally permits for IPOS.
Some Saudi companies paid employees early to free up cash to spend on shares.
Some retail investors may end up investing in the institutional offering through the special purpose vehicles offered by local banks, according to sources.
Proceeds from the sale will be transferred to the kingdom’s sovereign wealth fund, which has been making a number of a bold investments, plowing Us$45bil into Softbank Corp’s Vision Fund, taking a Us$3.5bil stake in Uber Technologies Inc and planning a Us$500bil futuristic city.