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24 October 2019

Saudi Aramco plans to explore incentives to reward loyal IPO buyers

Saudi Aramco is considering relying more on local funds after mixed feedback from international money managers forced the company to delay the offer’s kick-off.


Saudi Aramco is exploring ways to reward loyal investors in its initial public offering (IPO) to ensure the record share sale is not followed by a wave of selling, reported Bloomberg.

One potential measure that Saudi Aramco has discussed with Saudi regulators is whether it could offer bonus shares to retail stock buyers who keep their holdings for six months. The state-owned energy giant plans to reduce market volatility after it begins trading as well as provide a benefit to wealthy Saudi buyers who expect a windfall from local listings.

The oil company faces a delicate balance as it seeks to push its IPO valuation as close as possible to $2 trillion—a figure that is been met with scepticism from many professional investors—while making sure it’s attractive to potential Saudi buyers.

The company also has to deal with the expectations of domestic retail investors, who have received discounted shares in previous government privatisations as a way of redistributing wealth in the Kingdom.

Additionally, Saudi Aramco wants to ensure that its share price is not depressed by too many immediate sales from individual investors eyeing quick gains. It is not clear whether local regulators would approve the measures the energy company is proposing or if it would be practical to offer benefits to only certain types of investors at the expense of others.

The company could also give favourable allocation to long-term investors placing orders in the IPO. Saudi Arabia is said to be discussing a range of options and there is no certainty it will decide to proceed with any incentives.

Saudi Arabia has been seeking investments from the Kingdom’s wealthiest families for the IPO. Saudi Aramco is considering making a formal announcement of the listing plan as soon as the next few weeks as it pushes to complete the listing this year.







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