Saudi market regulator green lights Aramco IPO

John Benny, Al Arabiya English

Saudi Arabia’s Capital Market Authority (CMA), the Kingdom’s market regulator, said on Sunday that it issued a resolution approving Saudi Aramco’s IPO.

The CMA’s approval on the application will be valid for 6 months from the CMA Board resolution date, the regulator said in a statement.

“The CMA’s approval on the application should never be considered as a recommendation to subscribe in the offering of any specific company,” the regulator added.

Saudi Aramco is aiming to list a total of 5 percent to raise $100 billion at a $2 trillion valuation. The company is expected to list a 1 percent stake on Tadawul before 2019 end and another 1 percent in 2020, which will be followed up by an international offering in 2020 or 2021.

The company will list on the Saudi Stock Exchange on December 11, Al Arabiya sources confirmed last week.

Pricing will start on November 17 with a final price for the float expected to be announced on December 4, the sources said.

The proceeds of the Aramco IPO will go to Saudi Arabia’s sovereign wealth fund and will be used to accelerate the Vision 2030 program, a comprehensive plan to diversify the Kingdom’s economy and reduce its reliance on oil exports.

The company, which plans to pay a base dividend of $75 billion in 2020, reported a profit of $111.1 billion in 2018 and $46.9 billion in the first half of 2019. It is the most profitable company in the world, ahead of Apple Inc.

Earlier this year, Saudi Aramco said it would buy a 70 percent stake in Saudi Basic Industries Corp (SABIC), the Kingdom’s largest petrochemicals producer, to boost its downstream and chemicals businesses.

Attacks on two key oil installations in Saudi Arabia in September knocked off five percent of the global crude supply, which has since been restored by the world’s largest oil exporter.

“I want to move on… we in the energy industry in Saudi Arabia, we have got a few challenges, we have got an IPO and we want to make sure it’s a successful IPO,” the Kingdom’s Energy Minister Prince Abdulaziz said at the Russia Energy week last month.

FAQ's

Saudi Aramco is the Kingdom’s state-owned energy company and the world’s biggest oil producer. In November, the company reported a profit of $68 billion for the first nine months of 2019 – making it the most profitable company in the world.
An initial public offering (IPO) is the process by which a company sells a portion of its ownership (shares) to public investors to raise funds (also known as capital). The company sells its shares by listing them on a public stock exchange, where investors can purchase them.
"I am honored to announce that Saudi Aramco will become a listed company on the Saudi Stock Exchange,” Chairman Yassir al-Rumayyan said in early November. The exact percentage of the company and the possibility of another listing on a foreign exchange are both still unknown details, however.
Senior Saudi Arabian authorities have targeted a $2 trillion valuation. At this valuation, a 5 percent listing would raise $100 billion in funds – dwarfing any other IPO in history. However, some analysts and investment banks have predicted a range closer to between $1.2 and $1.5 trillion.
The IPO prospectus is expected to be released on November 10, with pricing expected November 17. Meanwhile, the float is expected to take place on December 4, followed by trading on December 11.
The IPO is part of Saudi Arabia’s overall strategy to transition into a post-hydrocarbon age. The income generated would be funneled into the Public Investment Fund (PIF), the Kingdom’s sovereign wealth fund (SWF). Saudi Arabia’s Vision 2030 plans to transform the PIF into a giant investment vehicle to help the country diversify its economy and reduce its reliance on oil revenues.
Saudi Vision 2030 is the Kingdom’s ambitious plan to diversify its economy by reducing dependence on oil and developing non-oil sectors ranging from healthcare to mining. The IPO is seen as a cornerstone of Vision 2030, boosting the PIF as the long-term investment vehicle for the Kingdom.

Saudi Arabia’s Crown Prince Mohammed bin Salman

- The Crown Prince is the architect of Vision 2030 and originally announced plans to list shares of Saudi Aramco in 2016.

Prince Abdulaziz bin Salman, Saudi Arabia’s Energy Minister

- Prince Abdulaziz assumed the role of energy minister in September of this year, replacing Khalid al-Falih.

Yasir al-Rumayyan, Chairman, Aramco

- Al-Rumayyan became chairman of Aramco’s board in September. He is best known as governor of the PIF, a role he continues to hold.

Amin Nasser, President and CEO, Aramco

- Nasser has been with Aramco for more than three decades and has held numerous leadership positions.