Saudi Aramco’s IPO has oversubscribed thus far, but not by a large margin

RIYADH / LONDON (Reuters) – Saudi Aramco’s initial public offering (IPO) was on track to be oversubscribed, but not by a large margin, according to figures released so far by the lead administrator before the December 4 close. for institutional investors to submit offers. .

FILE PHOTO: The Saudi Aramco logo is displayed at the oil facility in Abqaiq, Saudi Arabia, on Oct. 12, 2019. REUTERS / Maxim Shemetov / File Photo

Offers received through Friday from institutional and retail investors totaled $ 44.3 billion, chief manager Samba Capital said, about 1.7 times the value Saudi Arabia aims to raise from the sale of a 1.5% stake in the giant. state oil tanker.

Although the IPO has received more than enough offers, the level of interest is relatively low compared to other emerging market IPOs and moderate even when compared to the listing of a major Saudi bank in 2014 that was oversubscribed many times over.

If Riyadh hits its goal of raising 96 billion riyals ($ 25.6 billion) or more, it would still be a record global IPO, valuing the company at around $ 1.7 trillion.

But this is lower than the $ 2 trillion valuation originally touted by Saudi Crown Prince Mohammed bin Salman, who has put the sale at the center of his program to raise cash for ambitious plans to diversify the kingdom’s oil-dependent economy.

Riyadh scaled back its original IPO plans, scrapping an international tour to focus instead on boosting the deal among wealthy Persian Gulf allies. It has been silent on when or where the shares could be listed abroad, which had been central to the plans that were first announced in 2016.

Bankers said the roadshows in New York and London were canceled after international investors opposed the proposed valuation.

ATTRACT ALLIES

In the first update on institutional interest, Samba said that the value of the offerings had reached 118.86 billion riyals ($ 31.7 billion), with most of it coming from Saudi companies and funds, while foreign investors accounted for only the 10.5% of the offers.

Sources told Reuters this week that the sovereign wealth funds of Abu Dhabi and Kuwait, both OPEC oil producers like Saudi Arabia and close political allies, planned to invest.

The retail tranche, which closed to underwriters on Thursday, attracted offers worth 47.4 billion riyals ($ 12.64 billion), about 1.5 times the number of shares they were offered.

The level of interest is relatively modest compared to the listing of the National Commercial Bank of Saudi Arabia in 2014, when the retail portion was 23 times more subscribed.

Alibaba’s Hong Kong listing this month had offers for 40 times more shares than are being offered.

Saudi banks have been offering citizens easy loans to bid for shares in Aramco, the jewel in the crown of the Saudi economy and the world’s most profitable company.

Some financial institutions offered loans four times their usual limits and others did not set a maximum limit on the amount that clients who were considered creditworthy could borrow, two financial sources told Reuters.

The government had been encouraging wealthy Saudis to invest, promoting such investment as a patriotic duty, particularly after Aramco’s oil facilities were attacked in September. Riyadh and Washington blamed Iran, although Tehran denied the accusation.

Reporting by Marwa Rashad, Aziz El Yaakoubi and Clara Denina; Editing by Carmel Crimmins and Edmund Blair

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