RIYADH – Saudi Arabia on Sunday put a value of up to $1.71 trillion onenergy giant Aramco in what could be the world’s biggest IPO, but missedCrown Prince Mohammed bin Salman’s initial target of $2 trillion.
Aramco said it would sell 1.5 percent of the company in a blockbusterinitial public offering worth $24-25.6 billion, scaling down Saudi Arabia’sinitial plan to sell up to five percent of the firm.
“The base offer size will be 1.5 percent of the company’s outstandingshares,” the state-owned energy giant said as it began taking bids frominvestors in a price range of 30-32 Saudi riyals per share ($8-8.5).
The much-delayed offering, a cornerstone of Prince Mohammed’s ambitiousplan to diversify the oil-reliant economy, rivals the world’s biggestlisting — the $25 billion float of Chinese retail giant Alibaba in 2014.
Aramco had initially been expected to list on two exchanges, with a firstflotation of two percent on the kingdom’s Tadawul bourse, followed by afurther three percent on an overseas exchange.
But the firm has said there are no current plans for an international stocksale, indicating that the long-discussed goal has been shelved for the timebeing.
The IPO has been dogged by delays since the idea was first announced in2016, with Prince Mohammed’s desired valuation of $2 trillion meeting withscepticism from investors and analysts.
“(The) first impression is that (the) price is a sensible compromise andthat it will sell,” Tarek Fadlallah, chief executive officer of the MiddleEast unit of Nomura Asset Management, said on Twitter.
If priced at the top end of the range, it could eclipse Alibaba to becomethe world’s biggest IPO, Fadlallah added.——————————
*Boosting state coffers*——————————
Saudi Arabia is pulling out all the stops to ensure the success of the IPO,a crucial part of de facto ruler Prince Mohammed’s plan to wean the economyaway from oil by pumping funds into megaprojects and non-energy industries.
S&P Global Ratings said the stock market debut could enable the kingdom tostrengthen its financial position.
“If subsequently effectively deployed, the funds raised could be used tosupport longer-term economic growth in Saudi Arabia,” it said.
The government has reportedly pressed wealthy Saudi business families andinstitutions to invest, and many nationalists have labelled it a patrioticduty.
Last week senior cleric Abdullah al-Mutlaq sought to encourage Saudis toinvest in the IPO, saying in a local television programme that it waspermissible in Islam and even religious scholars were likely to participate.
Even for the domestic listing though, there are reports the firm isstruggling to attract foreign institutional investors, amid an uncertainoutlook for the energy sector and questions over company disclosures andgovernance.
In its prospectus released last week, the company lists a variety of risksranging from terrorist attacks to geopolitical tensions in a regiondominated by Saudi-Iran rivalry.
One striking element was a warning that global oil demand may peak withinthe next 20 years, citing a forecast from industry consultant IHS Markit.
It also acknowledged that climate change concerns could reduce demand forhydrocarbons.
But Aramco, a cash cow that catapulted the kingdom to become the Arabworld’s biggest economy, does appear to hold enormous appeal for localretail investors.
Many Saudis are seeking to tap lenders and sell personal assets to raisemoney to invest in the share sale.
Aramco last year posted $111.1 billion in net profit. In the first ninemonths of this year, its net profit dropped 18 percent compared with thecorresponding period of 2018, to $68.2 billion. – APP/AFP