Saudi Aramco is expected to offer 1.5 percent of its shares in the upcoming initial public offering (IPO) on the Saudi Stock Exchange (Tadawul), according to a document seen by Al Arabiya English.
The company has set an indicative price range of 30-32 riyals per share ($8-8.53), which would value the oil giant at $1.6 to $1.7 trillion, according to its new IPO prospectus. The final price for the offering is expected to be announced on December 5.
At this valuation, the company could raise $24-25.5 billion from the IPO, according to Al Arabiya English’s calculations. The high-end would top the record-breaking IPO of Chinese e-commerce giant Alibaba in 2014, which raised about $25 billion.
“The upper limit of the valuation– at $1.7 trillion– will allow for a minimum dividend of 4.4 percent; and this is very much comparable to international peers,” said Muneera al-Dossary, chief executive officer of Riyadh-based Mulkia Investment Company. “This is exactly what the investment community had expected,” she told Al Arabiya English.
Al-dossary predicts to see Saudi Aramco on a fast-track inclusion on the global index provider, MSCI – a step that would support the stock price further through demand and liquidity after listing, she added.
MSCI, which is used by funds that manage trillions of dollars around the world, recently said that if Saudi Aramco starts trading on the Tadawul on or before December 12, that it would add the company to the MSCI equity indexes from December 17. Otherwise, the company would have to wait to be considered for inclusion after January 5, 2020.
“We’ve seen institutional and individual investors very interested in the IPO, as the company enjoys a strong track record,” al-Dossary said, adding that Mulkia will subscribe to the IPO through the funds that it manages.
An updated version of Aramco’s IPO prospectus states that the offering will be open to qualified foreign investors (QFIs) and investors within Saudi Arabia, which means that there will be no international roadshow.
The Aramco IPO is expected to see overwhelming investor appetite from retail investors, which will be able to subscribe to 0.5 percent of shares.
The deadline to submit bid forms for institutional investors, such as banks or hedge funds, is set for December 4, while the deadline for retail investors – which starts November 17– is set for November 28.
According to the IPO prospectus, Saudi Arabian retail investors that hold their shares for a minimum of 180 days, or six months, would be eligible for a 10 percent discount through the allocation of additional bonus shares.
Russian officials earlier told Al Arabiya English that the Russia-China Investment Fund (RCIF) is working to lure Chinese investors for the IPO, as the company launches its much-anticipated public listing on the Saudi market.
China, which is the biggest consumer of Saudi Arabian crude oil, has shown interest in investing in Saudi Aramco. State-owned entities from the Asian country are reportedly in talks to invest up to $10 billion in the planned IPO, according to media reports.
The proceeds from the listing will go towards diversifying the Saudi Arabian economy away from oil, and could be invested in sectors such as logistics, mining, or developing the manufacturing and industrial economy.
“We understand that the bulk of the funds raised will go to the government or the Public Investment Fund, potentially adding to the sovereign’s already strong fiscal net asset position of 72.7 percent of gross domestic product (GDP),” S&P said in a note on Saudi Aramco’s IPO. “Productively deployed, we believe the assets could also help maintain growth potential through our three-year ratings horizon,” S&P added.
Saudi Arabian Crown Prince Mohammed bin Salman told Al Arabiya in 2017 that it could take the Kingdom 40-50 years to develop areas such as the mining sector without the IPO.
Aramco’s IPO plans had been put on hold last year following more than two years of Saudi market reforms and preparations. The state-owned company instead purchased a 70 percent stake worth $69 billion in Tadawul-listed petrochemical firm Saudi Basic Industries Corp (SABIC).
The acquisition of SABIC and Aramco’s sale of $12 billion bonds in April earlier this year were among the main factors behind the IPO’s delay, according to officials.
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.
Al Arabiya English has put together a timeline of the IPO’s key dates below.