DUBAI: The Saudi Arabian “sale of the century” — the initial public offering of shares in Saudi Aramco — moved into top gear with the announcement of pricing details and official valuation of the most profitable company in the world.
The Kingdom will sell a total of 3 billion shares in Aramco — around 1.5 percent of the total — at a valuation between SR30 ($8) and SR32 per shares, giving a total valuation of between $1.6 trillion and $1.7 trillion, making it the most valuable company in history.
Investment professionals welcomed the valuation, which was lower than the highest estimates of Aramco’s worth, as a “compromise” between the Kingdom and the financial world.
Tarek Fadhallah, CEO of Nomura Asset Management in the Middle East, said: “My first impression is that the price is a sensible compromise and that it will sell the IPO.”
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Setting the price range and the number of shares to be sold starts the “book building” process during which Aramco and its advisers will consult with potential investors and await bids from the institutions and private investors to decide at what level the shares will finally be sold.
A final pricing decision will come on Dec. 5, and trading is expected to start on the Tadawul shortly after.
Private investors — Saudi nationals, resident expatriates and Gulf nationals — will have to decide how many shares they want at the SR32 level, and wait to see if their application will be met in full.
If the final price is set lower than the top of the range, investors can have their money refunded or take up extra shares to an equivalent value. Aramco has decided not to market the shares via “roadshows” in certain markets because of a relaxation of Riyadh market rules that will allow foreign investors to buy shares on Tadawul.
The value of the stock on offer in the IPO will be between $24 billion and $25.6 billion — beating the existing record for a share issue set by Alibaba on the New York Stock exchange in 2014.
The proceeds from the sale — earmarked for investment into the diversification of the Saudi economy under the Vision 2030 reform plans — could go even higher depending on demand, with an extra chunk of shares allocated to advisers as part of the price stabilization mechanism.
Aramco is also committed to buying $1 billion in shares for its employees in an incentive scheme.