Saudi Aramco IPO on track for modest subscription

RIYADH/LONDON (Reuters) — Saudi Aramco’s initial public offering (IPO) was on course to be oversubscribed but not by a huge margin, according to figures released so far by the lead manager before a Dec. 4 close for institutional investors to submit offers.

Bids received by Friday from institutional and retail investors totaled $44.3 billion, lead manager Samba Capital said, about 1.7 times the value Saudi Arabia aims to raise from selling a 1.5 percent stake in the state-owned oil giant.

Although the IPO has received more than enough bids, the level of interest is relatively muted compared to other emerging market IPOs and subdued even when compared to the listing of a top Saudi bank in 2014 that was oversubscribed many times over.

If Riyadh hits its target of raising 96 billion riyals ($25.6 billion) or more it would still be a world record IPO, valuing the company at about $1.7 trillion.

But this is lower than the $2 trillion valuation originally touted by Saudi Crown Prince Mohammed bin Salman, who has put the sale at the heart of his program to raise cash for ambitious plans to diversify the kingdom’s oil-reliant economy.

Riyadh scaled back its original IPO plans, scrapping an international roadshow to focus instead on pushing the offering among wealthy Gulf Arab allies. It has stayed quiet on when or where it might list the stock abroad, which had been central to the plans that were first announced in 2016.

Bankers said roadshows in New York and London were canceled after international investors baulked at the proposed valuation.

In the first update on institutional interest, Samba said the value of bids had reached 118.86 billion riyals ($31.7 billion), with the bulk coming from Saudi companies and funds, while foreign investors accounted for just 10.5 percent of offers.

Sources told Reuters this week the sovereign wealth funds of Abu Dhabi and Kuwait, both OPEC oil producers like Saudi Arabia and close political allies, planned to invest.