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20 November 2019

Saudi Aramco receives nearly enough orders to list on Tadawul

Building early momentum is important in large equity offerings, as investors are encouraged to jump in when they see other institutions rushing to buy shares.

Bloomberg/Rodney Jefferson

Saudi Aramco’s bankers are seeing sufficient early demand to pull off the state oil giant’s initial public offering (IPO) just three days after launching the deal, reported Bloomberg.

The IPO arrangers are indicating in private discussions that they already have nearly enough orders to cover the institutional portion of the deal. According to Saudi Aramco’s prospectus they still have more than two weeks to go, as fund managers can subscribe to the stock until 4 December 2019.

The precise amount of real demand will only become clear later once underwriters compare the orders they’ve received. Saudi authorities have been pulling several levers to try and make the deal a success, pressuring the Kingdom’s richest families to invest and loosening margin lending rules for banks.

They’ve been negotiating commitments from the billionaire Olayan family, who own a major stake in Credit Suisse Group and Saudi Prince Alwaleed Bin Talal.

Saudi Aramco representatives have also been seeking investments from the Almajdouie family, who distribute Hyundai Motor Company vehicles in the Kingdom and members of the Al-Turki clan. Saudi Arabia’s sovereign wealth fund is seeking to sell about a 1.5 per cent stake in Saudi Aramco at a valuation of as much as $1.71 trillion, with about a third of the offering set aside for retail investors.

The Wall Street banks working on the transaction are set to lose out on a highly anticipated fee windfall after the deal was pared back from a record global offering to a mainly domestic affair. The foreign underwriters will be compensated for costs but may not be paid enough to make a meaningful profit from the deal.

Goldman Sachs Group and Morgan Stanley are among the banks that may miss out on the payday. Saudi Aramco was initially expected to pay $350 million to $450 million to the more than two dozen advisers on the deal, including banks, lawyers, marketing firms and advertising agencies.

After senior bankers delivered pitches that Saudi Aramco would be able to the achieve Crown Prince Mohammed bin Salman’s $2 trillion target with a five per cent sale, the Saudi government and Aramco management are frustrated Wall Street’s biggest names were unable to deliver on those ambitions.


RELATED STORIES: Morgan Stanley Goldman Sachs Group Crown Prince Mohammed bin Salman initial public offering Saudi Aramco Olayan family Saudi Prince Alwaleed Bin Talal





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