Saudi Aramco to offer 0.5 percent of shares to retail investors in planned IPO

Aramco said the subscription period for institutional and corporate investors will begin on November 17. (File photo: Reuters)

Saudi Aramco is aiming to offer 0.5 percent of its shares to retail investors in its planned initial public offering (IPO), the energy giant announced in a more than 600-page prospectus.

The company plans to float two percent on the domestic market as part of its first phase of going public, sources have told Al Arabiya. Saudi Arabia has targeted a $2 trillion valuation for the company, with analysts and investment banks forecasting within a range of $1.2 trillion to $2.3 trillion.

The world’s most profitable company said the subscription period for institutional and corporate investors will begin on November 17 and end December 4, while the same period for retail investors will run from November 17 until November 28.

The prospectus named a significant number of financial institutions as underwriters, including J.P. Morgan, BofA Merrill Lynch, Morgan Stanley, AlRajhi Capital, and First Abu Dhabi Bank.

The document said the government will prohibit Saudi Aramco from listing additional shares for six months after the commencement of trading under a “statutory lock-up period.”

It also stated a “contractual lock-up" under which Aramco shareholders will not sell any of their shares during a twelve-month period following the company’s market debut, except to foreign governments or a strategic investor affiliated with a foreign government.

Aramco may pay up to $100 million per year in “services and studies” for Saudi Arabia’s Ministry of Energy, the prospectus added.

Saudi Aramco also flagged risks related to oil prices and other factors.

“The financial position of the company and the value of the shares may be adversely affected by future developments, such as fluctuation in prices of, and supply and demand for, hydrocarbons or other economic, political and other factors over which the company has no control,” the document said.

In September, attacks on two of Aramco’s key oil installations in the Kingdom took out about 5 percent of the global crude supply and pushed prices up by 20 percent.

The company swiftly restored its output following the incident by tapping into its reserves and raising output from other oilfields. In its earnings report, Saudi Aramco said it did not expect the attacks “to have a material impact on its business, financial condition or results of operation.”

Aramco also reported a net profit of $68 billion for the first nine months of 2019, making it the most profitable company in the world by a significant margin.

The company launched the starting gun of its domestic IPO process last week following a conference featuring comments from the Chairman of Aramco and Governor of the Saudi Arabian sovereign wealth fund, the Public Investment Fund, Yassir al-Rumayyan, and CEO of Aramco Amin Nasser.

In an exclusive interview with Al Arabiya, al-Rumayyan said that investments into Aramco will come from “anywhere in the world.”

“To strengthen the Tadawul, and Saudi Arabia as a foreign investment destination, listing Saudi Aramco now is important,” Nasser added during the conference.

On Wednesday, PwC said that the IPO is expected to revive IPO activity, possibly encouraging a greater number of companies to list across the Gulf Cooperation Council (GCC) after a quiet third quarter.

“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.

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Last Update: Wednesday, 20 May 2020 KSA 10:01 - GMT 07:01
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