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08 December 2019

Saudi Aramco raises $25.6 billion in world’s biggest IPO

The sale is the first major disposal of state assets since Crown Prince Mohammed launched a much-touted plan to reduce the economy’s reliance on oil revenue in 2016.

Bloomberg/Simon Dawson

Saudi Aramco raised $25.6 billion from the world’s biggest initial public offering, closing a deal that became synonymous with the kingdom’s controversial crown prince and his plans to reshape the nation, reported Bloomberg.

The state-owned energy giant set the final price of its shares at SAR 32 ($8.53), valuing the world’s most profitable company at $1.7 trillion, after receiving total bids of $119 billion.

The Saudi Aramco deal ended up being very different from what Crown Prince Mohammed Bin Salman had envisaged when he first floated the idea in 2016 with an ambition to raise as much as $100 billion. Saudi Aramco offered just 1.5 per cent of its shares and opted for a local listing after global investors balked at its hopes of valuing the company at $2 trillion.

Instead, the oil giant relied heavily on local investors and funds from neighbouring Arabian Gulf allies. In the offering for individuals, almost five million people applied for shares. The institutional tranche closed last week, attracting bids totalling SAR 397 billion.

The Kingdom’s richest families are said to have made significant contributions to the deal. Global banks working on the deal were sidelined after Saudi Arabia decided to focus on selling the shares to local and regional investors.

Still, Saudi Aramco will become the world’s most valuable publicly-traded company once it starts trading, overtaking Microsoft and Apple. The pricing was at the top of the marketed range of SAR 30 to 32 riyals.

The deal opens up one of the world’s most secretive companies, whose profits helped bankroll Saudi Arabia and its ruling family for decades, to investors and Saudi individuals. Until this year, Saudi Aramco had never published financial statements or borrowed in international debt markets.

Additionally, the deal also means the company now has shareholders other than the Saudi government for the first time since it was nationalised in the late 1970s.

Saudi Arabia had been pulling out all the stops to ensure the IPO is a success. It cut the tax rate for Saudi Aramco three times, promised the world’s largest dividend and offered bonus shares for retail investors who keep hold of the stock.

Goldman Sachs Group, acting as share stabilising manager, has the right to exercise a so-called greenshoe option of 450 million shares. The purchase option can be executed in whole or in part at any time on or before 30 calendar days after the trading debut. It could raise the IPO proceeds to $29.4 billion.

Funds from the sale will be transferred to the Public Investment Fund, which has been making a number of bold investments, ploughing $45 billion into SoftBank Group’s Vision Fund, taking a $3.5 billion stake in Uber Technologies and planning a $500 billion NEOM futuristic city.

The last major government privatisation, the 2014 IPO of National Commercial Bank, received $83 billion in subscriptions from investors.


RELATED STORIES: Saudi Aramco IPO SoftBank Group’s Vision Fund Uber Technologies NEOM National Commercial Bank Goldman Sachs Group Crown Prince Mohammed Bin Salman





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