Saudi Aramco has fixed the price range for its impending IPO at the top of its proposed range, meaning that it is set to become the largest ever sum of capital raised from a public listing. According to sources reported across international media today, the decision has been reached to price the shares to sold through the upcoming IPO, which represent around 1.5% of the most profitable company in the world’s equity, at 32 riyals – or around 648p at current exchange rates. That would see the IPO raise a total of $25.6 billion – slightly ahead of the $25 billion online retailer Alibaba raised in 2014 to set the existing record.
The pricing of the IPO will give Saudi Aramco an overall initial market capitalisation of $1.7 trillion. That will put it some way ahead of Apple, $1.2 trillion, Microsoft, $1.14 trillion and Amazon, $863 billion, as the world’s most valuable public company. It’s already the world’s most profitable company, having published a net income figure of $111 billion for 2018. The IPO prospectus outlines a planned 2020 dividend of $75 billion to be shared among holders of the Saudi Aramco stock. That’s around 5 times more than the dividends Apple has recently paid investors.
With exclusive rights to Saudi Arabia’s rich and lucrative oil and gas fields, as well as ownership of refinery facilities and petro-chemicals companies, Aramco is the world’s biggest oil and gas company, dwarfing the so called ‘supermajors’ like Shell, BP, Chevron and ExxonMobil.
Despite opting for the high end of the proposed IPO price range, investor interest is reported to have been modest. But members of the sprawling Saudi royal family, and well-off citizens, are said to have been strongly ‘encouraged’ to support the IPO by buying shares. Despite the in-house sales efforts, interest in the IPO is said to have been limited compared to previous privatisations of government-owned Saudi businesses. For example, when the country’s National Commercial Bank was listed in 2014, the retail allocation was oversubscribed to the tune of 23 times.
A $2 trillion valuation was the original target of Crown Prince Mohammed bin Salman, Saudi Arabia’s de-facto ruler and driving force behind the Kingdom’s economic modernisation policy. The money raised through the IPO is earmarked to fund investments designed to diversify the country’s oil-reliant economy.
Monica Malik, the Abu Dhabi Commercial Bank’s chief economist commented:
“The amount raised by the IPO itself is relatively contained, given the size of the economy and medium-term funding requirement of the transformation plan.”
One potential boost to Saudi Aramco’s 2020 revenues and profits is the deep production cuts Opec, the organisation of major oil producers, and other major non-Opec producers like Russia, have reportedly agreed on at a meeting that has been taking place this week. A deal is expected to be reached today that could see cuts to rival or even outstrip those implemented in 2017-18.
Brent crude was up 0.6 per cent at $63.36 a barrel on the news.