Saudi Aramco declares $1.71 tn valuation in IPO

Saudi Aramco said it plans to sell 1.5 per cent of its shares at an indicative price range of 30 riyals to 32 riyals on Nov 17 2019

Saudi Aramco to sell small stake on Riyadh exchange

Saudi Aramco is worth up to US$1.7 trillion at the price range set by the oil giant on Sunday, below the US$2 trillion sought by Saudi's crown prince but putting it in the running to become the world's biggest IPO.

Aramco will sell just 1.5 per cent of its shares on the the local stock exchange, the Tadawul, somewhat less than expected.

Aramco said on Sunday it plans to sell 1.5 per cent of the company, or about 3 billion shares, at an indicative price range of 30 riyals to 32 riyals, valuing the IPO at as much as 96 billion riyals ($25.6 billion) and giving the company a potential market value of between $1.6 trillion and $1.7 trillion.

The high-end would top the record-breaking IPO of Chinese e-commerce giant Alibaba in 2014, which raised $25 billion.

The price for the shares will be set on December 5 and trading on the Saudi stock exchange, known as Tadawul, expected to start later that month, according to Aramco's prospectus.

The firm says there are now no current plans for an global sale, with that long-discussed goal now seemingly being put on ice.

"The upper limit of the valuation - at $1.7 trillion - will allow for a minimum dividend of 4.4 percent; and this is very much comparable to global peers", Muneera Al-Dossary, chief executive officer of Riyadh-based Mulkia Investment Company told Al Arabiya English. The company doesn't plan to list shares on the New York Stock Exchange. The firm has said the strikes would not have a material impact on its business. The value falls short of the $2 trillion figure floated by Crown Prince Mohammed bin Salman in 2016, when the IPO was first proposed.

If priced at the top end of the range, it could eclipse Alibaba to become the world's biggest IPO, Fadlallah added.

Saudi Arabia is selling shares in Aramco for the first time as part of an economic diversification plan aimed at weaning the kingdom off oil.

The deal is also rife with political risk, as the Saudi government - which relies on Aramco for the bulk of its funding - will continue to control the company.

Even for the domestic listing though, there are reports the firm is struggling to attract foreign institutional investors, amid an uncertain outlook for the energy sector and questions over company disclosures and governance.

In its prospectus released last week, the company lists a variety of investment risks ranging from terrorist attacks to geopolitical tensions in a region dominated by Saudi-Iran rivalry.

It also acknowledged that climate change concerns could reduce demand for hydrocarbons. And the kingdom is the world's largest exporter of crude.

Many Saudis are seeking to tap lenders and sell personal assets to raise money to invest in the share sale.

Aramco past year posted $111bn in net profit. Aramco earned net income of US$111 billion in 2018 on revenue of US$315 billion.

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