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November 10, 2019

Aramco targets sale of 0.5 percent to retail investors in IPO

Business

November 10, 2019

DUBAI: Saudi Aramco is looking to sell up to 0.5 percent of the state oil giant to retail investors in its planned initial public offering (IPO), three sources familiar with the matter told Reuters.

The Saudi oil group has not yet revealed the size of its planned IPO or what proportion of the company it will float, although sources have previously said this could be 1-2 percent.

Aramco declined to comment.

It is expected to release more details about the company in an IPO prospectus document later on Saturday.

Assuming Aramco achieves a total valuation of $2 trillion, the retail tranche could be worth around $10 billion, the sources said on Saturday.

Aramco fired the starting gun on the domestic IPO last week after a series of false starts. It did not give details on how much would be sold, or when the listing would happen, while expert valuations vary from $1.2 to $2.3 trillion.

A government committee has met in the past few months with dozens of wealthy Saudi individuals to secure pre-sale agreements, sources told Reuters last month.

And the government has encouraged investors to repatriate cash held overseas to buy into the IPO to avoid draining too much liquidity from the Saudi banking system, they said.

Reuters reported on October 17 that Aramco can take advantage of new market rules that allow issuers the flexibility to sell more shares to retail investors, likely exceeding the usual 10 percent seen in recent IPOs.

“Local demand is strong,” a second source said on Saturday, adding that this would lead institutional investors to think that up to 75 percent of the IPO would be available for them.

Crown Prince Mohammed bin Salman is seeking to raise billions of dollars to diversify the Saudi economy away from oil by investing in non-energy industries.

Initial hopes for a 5 percent initial public offering on domestic and international bourses were dashed last year when the process was halted amid debate over where to list Aramco overseas. Aramco said the IPO timetable was delayed because it began a process to acquire a 70 percent stake in petrochemicals maker Saudi Basic Industries Corp.

Aramco roadshows for the Riyadh IPO will begin on Nov. 18, according to the sources.

Bankers have told the Saudi government that investors will likely value the company at around $1.5 trillion, below the $2 trillion valuation touted by Prince Mohammed when he first floated the idea of an IPO nearly four years ago.

A deal over $25 billion would top the record-breaking one of Chinese e-commerce giant Alibaba in 2014.

A $2 trillion valuation would be almost twice that of Microsoft, currently the world’s most valuable listed company and seven times that of Exxon Mobil Corp, the biggest listed oil major by market cap.

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