Saudi Aramco prices shares at top of range in world’s biggest IPO

RIYADH/DUBAI: State-owned oil giant Saudi Aramco’s initial public offering (IPO) will be the biggest in history, but will fall short of the towering $2 trillion valuation long sought by Crown Prince Mohammed bin Salman.
Aramco priced its IPO at 32 riyals ($8.53) per share, the top of its indicative range, the company said in a statement, raising $25.6 billion and beating Alibaba Group Holding Ltd’s record $25 billion listing in 2014.
At that level, Aramco has a market valuation of $1.7 trillion, comfortably overtaking Apple Inc as the world’s most valuable listed firm. But the listing, expected later this month on the Riyadh stock exchange, is a far cry from the blockbuster debut originally envisaged by the Crown Prince.
Aramco did not say when shares would start trading on the Saudi stock market but two sources said it was scheduled for December 11.
Saudi Arabia relied on domestic and regional investors to sell a 1.5 per cent stake after lukewarm interest from abroad, even at the reduced valuation of $1.7 trillion.
Demand from institutional investors, including Saudi funds and companies, reached $106 billion, while retail investment’s demand hit $12.6 billion.
Around 4.9 million Saudi retail investors have bought shares in the oil giant, including 2.3 million aged between 31-45.
Aramco’s advisors said they may partly or fully exercise a 15 per cent “greenshoe” option, allowing it to increase the size of the deal to a maximum of $29.4 billion.
Climate change concerns, political risk and a lack of corporate transparency put foreign investors off the offering, forcing the kingdom to ditch ambitions to raise as much as $100 billion via an international and domestic listing of a 5 per cent stake.
Even at a $1.7 trillion valuation, international institutions baulked, prompting Aramco to scrap roadshows in New York and London and focus instead on marketing a 1.5 per cent stake to Saudi investors and wealthy Gulf Arab allies. Saudi banks offered citizens cheap credit to bid for shares.

DIVERSIFY FROM OIL
The IPO is the culmination of a years-long effort to sell a portion of the world’s most profitable company and raise funds to help diversify the kingdom away from oil and create jobs for a growing population.
“The amount raised by the IPO itself is relatively contained given the size of the economy and medium-term funding requirement of the transformation plan,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
“Nevertheless, combined with other areas of funding, we believe that there is meaningful capital in place to progress with the investment plans aimed at diversifying the economy.”
The government promoted the investment as a patriotic duty, particularly after Aramco’s oil facilities were attacked in September, temporarily halving the kingdom’s oil output. Despite the official push and offer of loans to fund share purchases, interest was relatively muted compared with other emerging market IPOs, including the listing of a top Saudi bank in 2014 which was oversubscribed many times over.
Alibaba’s listing in Hong Kong this month had bids for 40 times the number of shares on offer.
Sources have said the Abu Dhabi Investment Authority (ADIA) and Kuwait Investment Authority (KIA), sovereign wealth funds of two of Saudi Arabia’s Gulf allies, planned to invest in the deal. ADIA declined to comment, while KIA did not respond to requests for comment. Saudi citizens were offered 0.5 per cent of the company or about a third of the offering, an unprecedented retail offering compared with previous Saudi IPOs. — Reuters