'Aramco retail investors’ turnout unprecedented'

Aramco’s IPO set to value at nearly $1.7 trillion; sets indicative price range of SR30-32 per share

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A billboard displaying an advert for Aramco is pictured in Riyadh on November 11, 2019. — AFP

Saudi Gazette report

JEDDAH —
Saudis began flocking to banks to subscribe in Aramco's shares, coinciding with the start of the period of building the order book for the institutional and individual underwriting segments.

Saudi Aramco announced that it would offer 1.5 percent of its shares in the upcoming initial public offering (IPO) on the Saudi Stock Exchange (Tadawul), Saudi Press Agency (SPA) reported.

The company has set an indicative price range of 30-32 riyals per share ($8-8.53) for its planned IPO, which would value the company 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 Dec. 5.

At this valuation, the company could raise $24-25.5 billion from the IPO, according to calculations of experts. The high-end would top the record-breaking IPO of Chinese e-commerce giant Alibaba in 2014, which raised $25 billion.

Retail investors’ turnout for Saudi Aramco’s IPO is unprecedented, according to Rania Nashar, chief executive officer, Samba Financial Group.

Samba CEO told Al Arabiya TV that tens of thousands of investors have subscribed to hundreds of millions of Aramco shares at Samba since the launch of the offering.

“In the largest IPO in the Saudi market, we have not seen the current turnout of Saudi Aramco shares, taking into consideration that salaries have not yet come,” she added.

She also expected that the number of retail investors subscribing to Aramco is higher than any previous subscription in the market, noting that the announced price range represents a great opportunity for all investors.

“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,” Muneera Al-Dossary, chief executive officer of Riyadh-based Mulkia Investment Company 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.

“We’ve seen institutional and individual investors very interested in the IPO, as the company enjoys a strong track record,” she said.

“The upgrade of Saudi Arabia to the MSCI Emerging Market index last year coupled with the upcoming IPO listing of Saudi Arabia’s ARAMCO is met by much excitement from the global investment community,” Zainab Kufaishi, Invesco’s head of institutional business for the Middle East and Africa said.

Aramco explained that if the final offer price is below 32 riyals, individual investors can, in respect of the difference between the highest price of the offer price range and the final offer price, elect to have the surplus subscription amount refunded in cash by crediting the account of individual investors or to be considered for an allotment of additional offer shares.

An updated version of the IPO prospectus states that the offering will be open to qualified foreign investors (QFIs) and investors within Saudi Arabia.

It also indicated that the retail investor bidding closes on Nov. 28, and the institutional investor bidding closes on Dec. 4 with Dec. 8 the deadline of payment for institutional investors.

The IPO time also indicates that the announcement of final offer price and allocations of shares to institutional and retail investors as Dec. 5, with the refund of excess subscription funds (if any) to retail investors on Dec. 12.

The Aramco IPO is expected to see overwhelming investor appetite from retail investors. The company has said it would offer 0.5 percent of shares to retail investors.

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.

The bulk of the funds raised will go to the government's vast Public Investment Fund, the Kingdom's main investment vehicle.


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