Published: Mon, November 04, 2019
Markets | By Otis Pena

Saudi Aramco heads for possible record-setting market debut

Saudi Aramco heads for possible record-setting market debut

The petroleum giant, having now received approval, will list a small number of shares on the Saudi stock exchange Tadawul, in an initial public offering.

The authority said its "board has issued its resolution approving the Saudi Arabian Oil Co. application for the registration and offering of part of its shares".

Oil facilities in Saudi Arabia were attacked in September, reminding investors of the potential for instability in the Gulf region.

The company did not specific any additional security measures.

Bank analysts started showing IPO research to fund managers soon after Aramco, the world's most profitable company, on Sunday announced its intention to float on the domestic bourse in what could be the world's biggest listing.

- Aramco and the sovereign Public Investment Fund (PIF) agreed to amend payment terms so that 36% of the purchase price will be paid in cash and 64% will be paid as a seller loan on or before Sept 30, 2020.

Saudi Aramco on Sunday confirmed it planned to list on the Riyadh stock exchange, describing it as a "milestone" in the history of the energy behemoth.

More details may emerge should Aramco move ahead with its long-anticipated public listing, which has been delayed repeatedly, in part because investors are concerned that the proposed valuation is too high.

But a 1 per cent sale would raise "only" around $22 billion for Saudi coffers, less than the $36 billion generated by Chinese e-commerce giant Alibaba in its record-breaking IPO in 2014.

It would rank Aramco as the 11th biggest IPO of all time, Refinitiv data show.

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First suggested by Prince Mohammed in 2016, the IPO was delayed several times as worldwide investors balked at his $2 trillion valuation. To get the deal done, bankers will need hefty contributions from the kingdom's richest families, many of whom may have been targeted during a declared corruption crackdown in 2017 when scores of wealthy Saudis were held in Riyadh's Ritz-Carlton Hotel.

Although Saudi Arabia's richest families will underpin demand for IPO, expected to start trading in mid-December, bankers are still trying to woo global investors and have invited money managers in London for meetings next week, people said.

Saudi nationals would be eligible to receive bonus shares.

The company, which is officially known as the Saudi Arabian Oil Company, is an oil and natural gas giant that runs oilfields and natural gas fields across the kingdom and overseas, and is indisputably the crown jewel of Saudi Arabia's economy. Trading is expected to begin next month although no specified date has been announced.

Since Prince Mohammed first mooted the IPO in early 2016, Saudi Arabia and Aramco have re-worked the company's tax burden to boost profits and hence its appeal to investors.

Saudi Aramco IPO given go-ahead by Crown Prince.

Saudi Aramco is also exploring ways to reward loyal investors in the IPO to ensure the share sale isn't followed by a wave of selling. Weaker oil prices cut the company's first half net profit by 12% to $46.9 billion this year, but the figures still overshadowed Apple Inc AAPL.O , the world's most profitable listed company, which made $31.5 billion.

Oil majors have been raising payouts to shareholders to counter rising pressure from climate activism.

In its launch announcement Aramco said: "The company does not expect the impact of these attacks to have a material impact on its business, financial condition or results of operations". Shell's dividend yield is over 6%, according to Refinitiv data.

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