Aramco declares $1.71 trillion valuation in blockbuster IPO

Daniel Fowler
November 17, 2019

Saudi oil company Aramco announced on Sunday an indicative price range of 30-32 riyals per share (8-8.5 US dollars) for its planned public offering (IPO) which would value the company at 1.6 to 1.7 trillion dollars.

Aramco will announce the final price for the stock when the book-building period ends on December 5.

But the firm has said there are no current plans for an worldwide stock sale and the IPO seems to be banking on local demand, with one-third of the offering reserved for Saudi retail investors.

The price range has been set between 30-32 Saudi riyals per share ($8-8.5, €7-8 ).

An Aramco employee walks near an oil tank at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia.

If priced at the top end, the deal could just beat the record-breaking $25bn raised by Chinese e-commerce giant Alibaba in 2014.

"We are planning to subscribe to the IPO in two funds that we manage", said Zachary Cefaratti, chief executive officer of Dubai-based Dalma Capital Management Ltd, adding that the preliminary valuation was "in line with our expectations". When it initially announced plans to conduct a company IPO, Saudi Arabia's Crown Prince Mohammed bin Salman, predicted that the cost of a 5% stake would be $ 100 billion. It has said the strikes will not have a material impact on its business.

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Analysts S&P Global Ratings said the stock market debut could enable Saudi Arabia to strengthen its financial position.

The 600-page prospectus also includes the government's control over oil output as another potential risk.

Among those considering a sizeable investment is Prince Al-Waleed bin Talal, a billionaire tycoon who was held in Riyadh's palatial Ritz-Carlton hotel in 2017 during a crackdown on corruption, Bloomberg News reported.

That’s according to documents released on Sunday by the company.

It also acknowledged that climate change concerns could reduce demand for hydrocarbons.

The Riyadh listing comes after initial hopes for a 5 per cent IPO on the domestic and global bourses were dashed previous year amid debate over valuation and where to list Aramco.

The prospectus said the state giant would sell up to 0.5 per cent of its shares to individual retail investors but that it had still not decided on the percentage for larger institutional buyers. The oil and gas company netted profits of $111 billion a year ago, more than Apple, Royal Dutch Shell and Exxon Mobil combined.

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