Saudi Aramco IPO retail offering fully covered with one day to go
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Proceeds from the sale will be transferred to the Kingdom’s sovereign wealth fund, which has been making a number of bold investments, plowing $45 billion into SoftBank Group’s Vision Fund, taking a $3.5 billion stake in Uber Technologies and planning a $500 billion futuristic city.
THURSDAY 28, NOVEMBER 2019
The retail tranche of Saudi Aramco’s initial public offering (IPO) is fully covered with one day to go after 3.7 million investors applied to buy shares in the world’s biggest oil producer, reported Bloomberg.
Samba Capital, the lead manager stated that the subscription reached SAR 32.6 billion ($8.7 billion). A third of what’s likely to be the world’s largest share sale has been reserved for retail investors, who’ve been targeted by a country-wide advertising campaign and offered larger-than-usual loans to finance purchases.
There may be a last-minute surge before today’s final deadline for applications, but so far, the share sale has not been as well subscribed as some other IPOs in the country.
The book for National Commercial Bank’s 2014 IPO was covered 23 times over. In 2006, 10 million Saudis, about half the Kingdom’s adult population, applied to buy shares in the local unit of the Middle East’s biggest property develop, Emaar Properties.
The Saudi government plans to raise more than $25 billion by selling a 1.5 per cent stake in the company at a valuation of between $1.6 trillion and $1.7 trillion. Of that, one per cent is earmarked for institutional investors and the rest for Saudi retail buyers.
The Saudi Aramco IPO, a central element in Crown Prince Mohammed bin Salman‘s plan to modernise the Kingdom’s economy, will rely almost exclusively on local money after international investors balked at the valuation.
Saudi Aramco is still seeking to drum up support from institutional investors in the region, making pitches in Dubai and Abu Dhabi this week. Abu Dhabi plans to put as much as $1.5 billion into the offering, while the Kuwait Investment Authority is considering a potential investment.
Institutional book-building closes on 4 December 2019 before the IPO’s final pricing the next day.
The banking system is also being used to boost demand. The Saudi Arabian Monetary Authority is allowing smaller retail investors to borrow twice their cash investment, double the leverage limits the regulator normally permits for IPOs.
Some retail investors may end up investing in the institutional offering through the special purpose vehicles offered by local banks.
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