Saudi Aramco prospectus flags risks, gives few details on IPO size

  • Energy
  • Monday, 11 Nov 2019

World’s biggest IPO: Workers at Saudi Aramco’s oil processing facility in Abqaiq, near Dammam in Saudi Arabia’s eastern province. Saudi formally started its long-anticipated IPO of its state-run oil giant on Sunday, which will see a sliver of the firm offered on a local stock exchange in hopes of raising billions of dollars for the kingdom. — AP

DUBAI: Saudi state oil giant Aramco will sell 0.5% of its shares to individual retail investors and the government will have a lockup period of a year on further share sales after the initial public offering (IPO), according to its prospectus on Saturday.

The more than 600-page prospectus did not include details of how much of the company would be floated in total or of any commitments from anchor investors.

Sources have said the company could sell 1% to 2% on the Saudi stock market in what could be the world’s largest listing.

Offering for the shares will begin on Nov 17, the prospectus said.

Aramco fired the starting gun on the IPO on Nov 3 after a series of false starts. 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.

Among the risks highlighted in the prospectus were the potential for terrorist attacks and the potential for encountering antitrust legislation, as well as the right of the Saudi government to decide maximum crude output and direct Aramco to undertake projects outside its core business.

Aramco may also change its dividend policy without prior notice to its minority shareholders, it said.

Aramco’s oil facilities were targeted on Sept 14 in unprecedented attacks that temporarily shut 5.7 million barrels per day (bpd) of output – more than 5% of global oil supply.

The prospectus said the government would have a “statutory lockup period” for disposing of any shares after the listing for six months, and a contractual lockup period for 12 months.Aramco cannot list additional shares for a period of six months after trading starts, and will also be restricted from issuing additional shares for 12 months.

The offering for institutional investors will begin on Nov 17 and end on Dec 4, while retail investors will be able to bid for the shares from Nov 17 to Nov 28.

“Aramco IPO is an opportunity that shouldnt be missed, the largest company in the world....holding aramco shares is an absolute gain, ” a Saudi with a twitter handle named Abdulrahman wrote.

Aramco has been in talks with Gulf and Asian sovereign wealth funds and wealthy Saudi individuals to secure top investors of the IPO, but no anchor investor is yet to formally agree to a deal.

The Russia-China Investment Fund is working to attract Chinese investors for Aramco’s planned IPO, the head of Russia’s RDIF sovereign wealth fund said on Thursday.

Bankers have told the Saudi government that investors would likely value the company at around US$1.5 trillion, below the US$2 trillion valuation touted by Prince Mohammed when he first floated the idea of an IPO nearly four years ago. Initial hopes for a 5% IPO 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 timetable was delayed because it began a process to acquire a 70% stake in petrochemicals maker Saudi Basic Industries Corp.

The prospectus said Goldman Sachs was named as stabilising agent for the deal.

Analysts from banks working on the Riyadh bourse have projected a wide valuation range between US$1.2 trillion and US$2.3 trillion.

At the top valuation of US$2bil, Aramco could potentially raise US$40bil, topping the record-breaking US$25bil raised by Chinese e-commerce giant Alibaba in 2014.

The 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 capitalisation. — Reuters

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