Aramco IPO retail portion oversubscribed with SAR47.4bn in orders

A billboard displaying an advert for Aramco is pictured in Riyadh
A billboard displaying an advert for Aramco is pictured in Riyadh

Saudi Aramco completed the retail portion of its initial public offering (IPO) with $12.64 bn (SAR47.4bn) in orders on Thursday, according to SambaCapital, the IPO's lead manager.

The energy giant is offering 1.5%, or three billion, of the company's shares on the Saudi Stock Exchange (Tadawul) at an indicative price range of $8-$8.53 (SAR30-SAR32).

A third of those shares, 0.5%, are allocated to retail, or individual investors.

At the higher end of this price range, Aramco's retail portion ended its sale 1.48 times oversubscribed.

SambaCapital said, the shares sold amounted to 1,481,613,280.

The firm added that institutional investors hadput orders for SAR118.86bn during the first 12 days of the book buildingprocess.

The deadline to submit bid forms forinstitutional investors, such as banks or hedge funds, is set for Dec. 4, whilethe deadline for retail investors, which starts Nov. 17, was on Nov. 28.

According to the IPO prospectus, Saudi Arabianretail investors that hold their shares for a minimum of 180 days, or sixmonths, would be eligible for a 10-percent discount through the allocation ofadditional bonus shares.

The proceeds from the listing will go towardsdiversifying the Saudi Arabian economy away from oil, and could be invested insectors such as logistics, mining, or developing the manufacturing andindustrial economy.

"We understand that the bulk of the funds raisedwill go to the government or the Public Investment Fund, potentially adding tothe sovereign's already strong fiscal net asset position of 72.7% of grossdomestic product (GDP)," S&P said in a note on Saudi Aramco's IPO.

"Productively deployed, we believe the assetscould also help maintain growth potential through our three-year ratingshorizon," S&P added.

Muneera Al-Dossary, chief executive officer ofRiyadh-based Mulkia Investment Company, had predicted at the launch of the IPOthat Aramco will be on a fast-track inclusion on the global index provider,MSCI — a step that would support the stock price further through demand andliquidity after listing.

MSCI, which is used by funds that managetrillions of dollars around the world, recently said that if Saudi Aramcostarts trading on the Tadawul on or before Dec. 12, that it would addthe company to the MSCI equity indexes from Dec. 17. Otherwise, the companywould have to wait to be considered for inclusion after Jan. 5, 2020.

"We've seen institutional and individualinvestors very interested in the IPO, as the company enjoys a strong trackrecord," Al-Dossary said, adding that Mulkia will subscribe to the IPO throughthe funds that it manages.

It was also revealed this week that thesovereign wealth funds of Abu Dhabi and Kuwait too plan to invest. In addition,Saudis have been eager to buy shares, with many seeking to invest on behalf oftheir dependents to increase the number of shares they can buy. 

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