Sunday 10 November 2019 5:19 pm

Saudi Aramco to offer retail investors $10bn-worth of shares in blockbuster float

Investors will start bidding for shares in Saudi Aramco next Sunday, as the starting gun fires in the race to own a part of the world’s most profitable company.

In what could be the biggest ever stock market listing, Aramco said in its Initial Public Offering (IPO) prospectus over the weekend that it will offer 0.5 per cent of its shares to ordinary investors as part of the float.

Read more: Saudi Aramco insiders say the kingdom has set a date for its IPO

If it achieves its ambitious $2 trillion (£1.57 trillion) valuation, this would amount to about $10bn-worth of shares when it hits public markets on 17 November.

However, despite coming to 658-pages, the prospectus did not include important details about the deal such as the number of shares on offer, or the offer price.

It also lacked commitments from early supporters to back it. This comes despite reports that some of Saudi Arabia’s richest families have been urged to buy in.

The prospectus did, however, say that among the risks for investors were the potential for terrorist attacks and the potential for encountering antitrust legislation.

It also said the Saudi government has the right to decide maximum crude output and direct Aramco to undertake projects outside its core business.

Aramco may also change its dividend policy without prior notice to its minority shareholders, it said.

Aramco disappointed potential investors last year when a long-awaited dual float on both international and domestic stock exchanges was temporarily called off. 

However, the company now hopes to list on the Tadawul stock exchange in December, in a blockbuster IPO that will reportedly drum up $450m in fees for the firms advising.

Crown Prince Mohammed bin Salman is seeking to sell the shares to raise billions of dollars to diversify the Saudi economy away from oil by investing in non-energy industries.

The company made $111bn profit last year, and its estimated worth is more than $1 trillion, making it potentially the world’s most valuable company, alongside behemoths such as Apple and Microsoft.

The government also faces a six month lock-up period on any further share sales.

Read more: Saudi Aramco IPO: The pros and cons

“Apart from the oil price, of course, the main risks are the degree to which Aramco needs to shoulder the burden of OPEC Plus output restraint, allocation of capital into projects which maximise value for Saudi overall as opposed to Aramco minority shareholders, physical security risks and the dividend payout ratio in the long-term,” said Hasnain Malik, head of equity strategy at Tellimer.

“Valuation at the time of the IPO will depend on how much of demand is made up by subscribers who are prepared to overlook these factors in favour of Aramco’s low depletion rate … and its very low cost of extraction versus peers.”