Aramco to start taking bids from investors
Saudi Aramco says it will start taking bids from investors on November 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 (IPO).
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% of global oil supply.
The prospectus said the huge state company will sell up to 0.5% of its shares to individual retail investors but it has still not decided on the percentage for larger institutional buyers.
The company has hired a host of international banking giants, including Citibank, Credit Suisse and HSBC, as financial advisers and bookrunners.
In its push for transparency, the secretive company’s prospectus 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.
However, important details are 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 is a book-building exercise,” said Nasser Saidi, an analyst. “And let’s be clear, Saudi will do whatever it takes to make this IPO successful because so much hinges on it.”
Aramco is unlikely to hit the $2-trillion valuation that de facto ruler Crown Prince Mohammed bin Salman had initially hoped for. Investment research firm Bernstein estimates that the valuation could fall in a range of $1.2-trillion (R17.8-trillion) to $1.5-trillion.
THE GOVERNMENT HAS REPORTEDLY PRESSED WEALTHY SAUDI BUSINESS FAMILIES AND INSTITUTIONS TO INVEST
Based on a $1.5-trillion valuation, a 2% stake sale would raise Aramco $30bn. That would still make it the world’s biggest IPO, eclipsing Chinese retail giant Alibaba’s $25bn 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. 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 5% on two exchanges, with a first listing of 2% on the kingdom’s Tadawul bourse, followed by a 3% listing on an overseas exchange. But the firm has said there are no plans for an international stock sale, indicating that the long-discussed goal of a second offering on a foreign bourse has been shelved for the time being.
But even for the domestic listing, there are reports that the firm is struggling to attract foreign institutional investors.
Norway’s sovereign wealth fund, the world’s largest, does not plan to invest in Aramco, a Norwegian official said.
But China, the world’s top oil importer, may commit as much as $10bn through sovereign wealth funds and other stateowned enterprises, Bloomberg News reported.