By
Bhushan Akolkar
April 12th, 2024
Saudi Aramco has indicated in its prospectus that less than 1% of its shares are available for retail investors in its upcoming IPO.
In what seems like a preference for institutional investment, Saudi Arabia’s State Oil Company Aramco in its prospectus has indicated offering of less than 1% of the shares on offer to individuals reports show. According to the prospectus, the initial public offering which is expected to begin on November 17 and close on December 4 has specifically indicated that “up to 0.5%” of the shares on offer will be available for purchase by individuals.
Furthermore, the number of shares sold and their value in terms of price will be determined at the end of the offer period not before. Also, individual investors will not be able to request shares beyond November 28 which shows the company’s preference for institutional investors.
The shares thereafter will be floated on the Saudi Stock Exchange (also referred to as Tadawul) in December with an initial valuation (unofficial) between $1.2 trillion to $2 trillion sources say. The oil giant has meanwhile confirmed plans to issue a dividend payment worth at least $75 billion which indicates that the main draw for the investors is not the book value of the shares themselves but rather the consistency of dividend payments even though the actual value of what actually is the world’s largest oil company remains unknown till date.
The initial public offering (IPO) which is being underwritten by major United States financial institutions such as Morgan Stanley, Goldman Sachs, Citigroup, J.P Morgan, and others already has faced several hiccups in the past. The IPO was originally slated to take place in 2016 but it faced several delays and was postponed due to worries about a public examination of its financial records.
The recent attacks on Aramco’s installations also stoked fears that the IPO will be postponed yet again. This, however, was not unexpected by the management of the company as it had given indications of the impact of terrorism and armed conflict on its share prices as well.
There are also indications that this listing might not be the only one in the offing at the moment. Sources say that the oil giant is also considering a listing on another international exchange. This has brought all the major stock exchanges in the world in tow to try and get the management of Aramco to purportedly list the 1%-2% of the organization internationally although this secondary listing will allegedly occur in time after the success of the IPO.
With proven reserves of more than 260 billion barrels and being the world’s top producer of oil, the Kingdom of Saudi Arabia is seeking to drive its economy in a different direction using other means of diversification which is a part of the Saudi Vision 2030 being the economic resurrection plan by the Crown Prince Mohammed Bin Salman.
Although valuations have been unsure, the stock is expected to be the darling of institutional investors as the limited nature of Aramco stock will make it a must-have before during and after the IPO.