Saudi Aramco raises $25.6bn in largest-ever IPO

Andrew Cummings
December 6, 2019

The record-breaking market listing is towards the higher end of Aramco's recent expectations but it still falls well short of the ambition of Crown Prince Mohammed Bin Salman to value the country's economic crown jewels at $2tn.

The energy giant had been offering 1.5 percent, or three billion, of the company's shares on the Saudi Stock Exchange (Tadawul) at an indicative price range of SR30-32 ($8-$8.53).

Aramco plans to sell 1.5 per cent of its shares in a deal that could raise up to $25.6 billion.

The firm relied on domestic and regional investors to sell a 1.5% stake after lukewarm interest from overseas.

The deal amount could increase to as much as US$29.4 billion, if the Saudi Arabian firm decides to utilise a "greenshoe", or over-allocation option amounting to 15%, Reuters has reported.

The IPO came as Saudi Arabia met with Russian Federation and other members of the Organization of the Petroleum Exporting Countries (Opec) in Vienna to discuss oil production.

Climate change concerns, political risk and a lack of corporate transparency put foreign investors off the offering, forcing the kingdom to ditch ambitions to raise as much as $100 billion via an worldwide and domestic listing of a 5% stake.

Even at a $US1.7 trillion valuation, worldwide institutions baulked, prompting Aramco to scrap roadshows in NY and London and focus instead on marketing a 1.5 per cent stake to Saudi investors and wealthy Gulf Arab allies.

The state-owned Saudi oil giant has received subscription orders for around 5.9 billion of shares so far from institutions in the first 17 days of the IPO, Samba Capital, NCB Capital and HSBC Saudi Arabia said.

The IPO is the culmination of a years-long effort to sell a portion of the world's most profitable company and raise funds to help diversify the kingdom away from oil and create jobs for a growing population.

But Aramco, a cash cow that turned the kingdom into the Arab world's biggest economy, appears to hold enormous appeal for local retail investors, some of whom have incurred debts to fund share purchases.

The Saudi government also stipulates oil production levels, which directly impacts Aramco's output.

Alibaba's listing in Hong Kong this month had bids for 40 times the number of shares on offer.

Oil and gas corporation Saudi Aramco has taken the honour of being the world's biggest initial public offering (IPO).

Saudi Aramco has been meeting with representatives from sovereign funds in the lead up to this announcement, in a bid to drum up support and interest from institutional investors. A third of those shares, 0.5 percent, were allocated to retail, or individual investors.

It pledged to pay $75 billion in dividends in 2020.

Aramco plans to list just 1.5% of the company on the local Tadawul stock exchange after marketing the float nearly exclusively to investors in Saudi Arabia and the Middle East.

Saudi Arabia has faced worldwide criticism after the murder of Saudi journalist Jamal Khashoggi past year in the Saudi consulate in Istanbul and for its role in a war in Yemen.

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