Saudi Aramco sets its IPO price at $8.53 per share: Sources

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Saudi Aramco on Thursday set its Initial Public Offering (IPO) price at 32 riyals ($8.53) per share, at the top end of an indicative price range, Reuters reported, citing sources.

At $8.53 per share, the company would raise $25.6 billion from the IPO, making it the world's largest IPO, topping Alibaba's 2014 listing, which raised $25 billion.

At this level, Aramco would have a market valuation of $1.7 trillion, overtaking Apple Inc as the most valuable listed firm.

Saudi Aramco will make a formal announcement later on Thursday, Reuters reported.

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 30-32 riyals ($8-$8.53). A third of those shares, 0.5 percent, were allocated to retail, or individual investors.

Aramco completed the retail portion of its IPO last Thursday. It was 1.48 times oversubscribed with 47.4 billion riyals ($12.64 billion) in orders.

Banks in Saudi Arabia have been directed to lend to retail customers at a ratio of 2 to 1 for every riyal invested towards buying Aramco’s shares.

According to the IPO prospectus, Saudi Arabian retail investors that hold their shares for a minimum of 180 days, or six months, will be eligible for a 10 percent discount through the allocation of additional bonus shares.

The Aramco IPO is a cornerstone of Saudi Arabia’s Vision 2030 plan, which aims to wean the Kingdom off its reliance on oil to diversify the economy. The proceeds from the listing will go towards these diversification initiatives 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.

The IPO may also impact the regional markets by encouraging a greater number of companies to list across the Gulf Cooperation Council (GCC) after a quiet third quarter, PwC said in early November.

“We anticipate the coming quarter to be significantly more active with the recent announcement of Saudi Aramco’s record breaking flotation on Tadawul, along with many other companies which have expressed their intention to list in 2019,” said Steve Drake, Partner, Capital Markets, PwC Middle East.

Aramco’s IPO plans had been put on hold last year following more than two years of Saudi Arabian 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.

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