Sector News

Aramco IPO values company at $1.62–1.72 trillion

November 18, 2019
Chemical Value Chain

Saudi Aramco on Sunday said it will list a 1.5% stake, or 3 billion shares, on the Tadawul (Riyadh) stock exchange in its initial public offering (IPO). The Saudi government set the IPO price range between 30–32 Saudi riyal per share, valuing the IPO at SR90–96 billion ($24.3–25.9 billion) and giving the whole company a market value of between $1.62 trillion and $1.72 trillion. This is below the $2 trillion for which Crown Prince Mohammed bin Salman was originally hoping and reportedly just below the midpoint of the range of values given by 16 banks involved in or commenting on the listing. The range is said to run from $1.1 trillion up to $2.5 trillion, with a midpoint of $1.75 trillion. The final price of the shares will be determined on 5 December.

At the top end of the range, the IPO would be just larger than that of the Chinese e-commerce giant Alibaba’s record $25-billion New York stock market debut in 2014. At the bottom end, it would be just below it. Aramco has not yet named any cornerstone investors in the deal or formally disclose the listing date.

Saudi officials have reportedly been disappointed by the lukewarm reception given to the IPO by many foreign institutions, especially in western and other developed countries. In fact, the listing was reportedly pared back to 1.5% from the much-touted 2% or more level originally expected because of poor international demand. The Financial Times reported today that Aramco has cancelled plans for IPO roadshows in the US, Canada, Europe and Japan, and will now market the issue only in Saudi Arabia, the UAE, Bahrain, Kuwait and Oman. Saudi officials have been told by their advisers that the bottom end of the price range is still higher than most investors outside the Middle East are willing to pay.

However, despite doubts outside the Middle East, the IPO is expected to be a huge hit among Saudi individual investors who are being offered up to 0.5% of the company. In fact, the size of the IPO could be even bigger if there is enough demand to activate a 15% “greenshoe” over-allotment option.

Retail investors have until 28 November to sign up for the IPO while institutional investors can subscribe until 4 December. Riyadh was chosen for the listing after initial hopes for a 5% IPO on domestic and international bourses were dashed amid a debate over valuation and the appropriate venue for a foreign listing. London, New York, and Tokyo were all considered. Plans for an international placing are now officially on hold. Analysts note, however, that Saudi Arabia could still use more Aramco bond issues or the option, clearly stated in the IPO prospectus, of selling tranches of Aramco shares to foreign governments or government-owned entities, to raise additional funds from Aramco.

5 December, the day on which the Aramco launch price will be finally determined, is coincidentally also the date of the start of an OPEC meeting in Vienna, at which cartel members are expected to consider possible cuts in oil production. Analysts say the Saudi attitude at this meeting will be an indicator of how Aramco will be managed as a publicly listed, rather than government-owned, company. Saudi Arabia is estimated to need a Brent crude price of $80–84 per barrel to balance its budget and staunch the continuing drain on its foreign currency reserves.

By Natasha Alperowicz

Source: Chemical Week

comments closed

Related News

May 15, 2022

New York’s EPR and packaging reduction bills lauded as game-changers in plastic pollution battle

Chemical Value Chain

The US State of New York is introducing two new bills to combat over-packaging, poor recycling rates and litter issues, including an Extended Producer Responsibility (EPR) program requiring companies such as McDonald’s and Amazon to pay for the cost of packaging disposal and recycling.

May 15, 2022

Borealis and Reclay launch entity focused on lightweight packaging 

Chemical Value Chain

The new organization’s mission is to redesign the critical steps of the plastics sorting and recycling system for post-consumer lightweight packaging (LWP) to speed up circularity, born from a need to meet the rising market demand for high-quality recyclates for use in high-end plastic applications.

May 15, 2022

Starbucks and Hubbub launch reusable packaging fund as COVID-19 diminishes consumer appetite

Chemical Value Chain

Starbucks and Hubbub have launched a £1 million (US$1.22 million) “Bring It Back Fund” to increase the uptake of reusable packaging in the F&B industry. The funding will go toward innovative ideas that make it easier for customers to use alternatives to single-use packaging by supporting pilot projects that help shift consumption habits.