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Saudi Aramco finally fires starting gun on stock market debut

posted onNovember 4, 2019

Saudi Aramco announced its intention to proceed with its initial public offering (IPO) on the Main Market of Tadawul, the domestic bourse. Saudi Arabia’s Capital Market Authority approved the state-owned oil giant’s application for the listing on Sunday (Nov.3). 

Crown Prince Mohammed bin Salman, who is the country’s de facto ruler, first announced plans to take the company public in 2016. The IPO was delayed several times reportedly due to his dissatisfaction with the valuation of the Dhahran-headquarted firm, which fell short of the hoped for $2 trillion. 

Business sources say Aramco could offer 1 percent to 2 percent of its shares on the Riyadh stock exchange, raising as much as $20bn-$40bn. 

The IPO prospectus is expected to be announced on November 9, Aramco Chief Executive Amin Nasser told a media conference. The company will determine the IPO launch price after registering interest from investors.

The listing announcement had been expected on October 20 but was delayed after advisers said they needed more time to lock in cornerstone investors, three sources told Reuters.

The company had initially been expected to sell a total of five per cent on two exchanges, with a first listing of two per cent on the Tadawul followed by a three per cent listing on an foreign exchange. 

However, Aramco made no mention Sunday of a foreign listing but it did say that the Riyadh offering was open to institutional investors as well as Saudi individuals, foreigners resident in the kingdom and other Gulf citizens. 

Trading is expected to begin next month, although the company did not specify a date and offered few other specifics. 

Much of the proceeds from the offering are not likely to flow to Aramco’s operations but into the Public Investment Fund, the sovereign wealth fund of Saudi Arabia, a vehicle for shifting the Kingdom's economy from its reliance on oil.

CEO Aramco

(Saudi Aramco Chief Executive Amin Nasser)

On Sunday, Aramco which only began releasing interim financial results recently, said it had earned $68 billion for the year through September.

Revenues and other income related to sales for the same period amounted to $244bn. Its 2018 net profit was $111.1 billion, almost twice Apple’s profit and many times the earnings of Exxon Mobil, the largest listed oil company, and Royal Dutch Shell. Apple is the world's largest company by value currently.

Aramco hired nine banks as joint global coordinators to lead the IPO, including JPMorgan, Morgan Stanley and Saudi Arabia's National Commercial Bank. It added a number of banks as book-runners.

Saudi Aramco is worth $1.2 trillion, according to analysis from Bloomberg. Goldman Sachs Group Inc. told investors Aramco is worth between $1.6 trillion and $2.3 trillion. Bank of America had the bottom of its range at just $1.2 trillion. BNP gave an estimate of $1.42 trillion. How much Aramco is really worth will be determined by the market.

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