Published: Sun, November 10, 2019
Markets | By Otis Pena

Will Japan Turn Its Back On The Aramco IPO?

Will Japan Turn Its Back On The Aramco IPO?

On Friday, the 8th of November 2019, expressing a sheer caution over an upcoming Saudi Aramco IPO in the Kingdom's domestic market, President of Japan's largest refiner, JXTM Holdings told that a majority of investment companies of Japan, the world's third-largest economy, would unlikely to bank on a high-profile Aramco IPO as it became increasingly hard to evaluate the Saudi state-owned oil giant's precise market valuation over the narratives of a lower crude oil price.

The IPO process will begin on November 17 and close on December 4.

The offering period for individual subscribers begins on November 17 and closes at the end of November 28.

However, the energy giant indicated on Saturday that it won't disclose how much it plans to sell of the company or raise from the offering until early December, depending on ultimate investor demand, Efe news reported. Aramco also said it will determine the percentage to be sold to institutional investors after consultations with its financial advisers and global coordinators, according to AFP.

A prospectus released from Saudi Aramco said selling shareholder will receive all of the proceeds of the offering and will reimburse Saudi Aramco for all fees, costs and expenses it incurs. Although one of the attractions for investors is the potential of high dividends, the document said Aramco has the right to change dividend policy without prior notice.

Aramco's oil facilities were targeted on 14 September in unprecedented attacks that temporarily shut 5.7 million barrels per day of output - more than 5 percent of global oil supply.

Saudi Arabia is pulling out all the stops to ensure the success of the IPO, a cornerstone of Prince Mohammed's ambitious plans to steer the economy away from oil by pumping tens of billions of dollars into a host of mega-projects and non-energy industries.

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After the flotation, Aramco will not list any more shares for six months, the prospectus says.

The Russia-China Investment Fund is working to attract Chinese investors to Aramco's planned IPO, the head of Russia's RDIF sovereign wealth fund said on Thursday.

Analyst valuations of the state-backed oil giant have so far varied greatly, ranging from between $1.2T to $2.3T. A deal over $25bn would top the record-breaking IPO of Chinese e-commerce giant Alibaba in 2014.

The oil and gas company had profits of $111 billion a year ago, more than Apple, Royal Dutch Shell and Exxon Mobil combined.

The valuation would be nearly twice that of Microsoft, now the world's most valuable listed company, and seven times that of Exxon Mobil Corp, the biggest listed oil major by market capitalisation.

"Due to its size and likely free float, Aramco should be eligible for fast-track inclusion in both the FTSE and MSCI Emerging Market indices within 10 days of the IPO", said Dominic Bokor-Ingram, senior portfolio manager at Fiera Capital.

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