Saudi Capital Market Authority gives green light for Aramco’s record IPO

Saudi Capital Market Authority gives green light for Aramco’s record IPO
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President and CEO of Saudi Aramco Amin Nasser (L) and Aramco's chairman Yasir al-Rumayyan attend a press conference in the eastern Saudi Arabian region of Dhahran on November 3, 2019. (AFP)
Saudi Capital Market Authority gives green light for Aramco’s record IPO
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Yasser al-Rumayyan, Saudi Aramco's chairman, speaks during a news conference at the Plaza Conference Center in Dhahran, Saudi Arabia on Nov. 3, 2019. (REUTERS/Hamad I Mohammed)
Saudi Capital Market Authority gives green light for Aramco’s record IPO
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General view of Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. (REUTERS/Ahmed Jadallah/File Photo)
Updated 17 November 2019

Saudi Capital Market Authority gives green light for Aramco’s record IPO

Saudi Capital Market Authority gives green light for Aramco’s record IPO
  • Saudi bourse ‘ready to receive largest listing in history of financial markets’
  • Percentage of local and international investors will be set later after IPO

DUBAI/DHAHRAN: Saudi Aramco's multibillion-dollar share sale, likely the biggest initial public offering (IPO) in history, is officially underway after the company formally announced its plans to list stock on the Kingdom’s stock exchange, the Saudi Tadawul.

By the middle of December, Saudi citizens, expatriates and international investing institutions will be able to buy quoted shares in the world’s biggest oil company, fulfilling a pledge made by Crown Prince Mohammed bin Salman in 2016.

Aramco Chairman Yasir Al-Rumayyan made the announcement in Dhahran, saying: “Today marks a significant milestone in the history of the company, and important progress toward delivering Saudi Vision 2030, the Kingdom’s blueprint for sustained economic diversification and growth.”

News of the long-awaited IPO came in the form of a notice from the Capital Markets Authority (CMA), the market regulator, that the proposed share issue has been approved.

 

“Saudi Aramco has received the confirmation from Saudi Tadawul to list ... it will start the official IPO (process),” Al-Rumayyan, who is also the governor of the Saudi Public Investment Fund, said during a press conference in Dhahran.

“The biggest shareholder will be Saudi … One thing has not changed about the company, its constant desire for growth and expansion,” Rumayyan said. “Today, because of the IPO, new people can reap the benefits of Saudi Aramco.”

Rumayyan also said that: “Aramco’s listing in Tadawul shows that our country has become more attractive to international investors.” He added that there are no current plans for a foreign share listing and the shares offering would be limited to the Tadawul for now.

Rumayyan, responding to reporters’ questions, also said that the percentage of foreign/local investors was yet to be determined. “The percentage of local and international investors will be set later … after we are done with the public offering,” he said.

The offering price was also still to be determined, Rumayyan added.




View of the production facility at Saudi Aramco's Shaybah oilfield in the Empty Quarter, Saudi Arabia. (REUTERS/Ahmed Jadallah/File Photo)


Financial performance

Aramco also gave details of its financial performance in the period that included the attacks on its facilities at Abqaiq and Khurais, which knocked out a big chunk of oil production for a short time.

Aramco still made $68 billion in the last nine months of the year, and suffered no material financial effect from the attacks.

No exact details of the timing or valuation of the IPO were given. There will be more information published in a detailed prospectus expected early next week.

The final value of the IPO will depend on how much demand there is from Saudi, regional and international investors, a process known as “book building” in the financial industry.

“The percentage of international investors versus local investors is yet to be determined,” said Aramco CEO and President Amin Nasser.




Amin Nasser, President and CEO of Saudi Aramco, speaks during a press conference in Dhahran on Nov. 3, 2019. (AFP)

Today the company … makes a new step to offer chances for Saudi nationals and others to own shares in Aramco,” Nasser said.

He also described the company’s research activities, which was “focused on advancing the technologies we use for filtration and creating more green technologies for oil filtration.” 

 

Foreign exchange

Al-Rumayyan said there are no current plans to list the shares on a foreign exchange. Many international bourses have been vying for the privilege of staging the world’s biggest and most profitable company, but Al-Rumayyan said: “For the international listing part, we’ll let you know in due course. So far, it’s only on Tadawul.”

Tadawul CEO Khalid Al-Hussan said the exchange is “ready to receive the largest listing in the history of financial markets.”

Cornelia Meyer, business consultant, macro-economist and energy expert, told Arab News: “Good idea to start with a Tadawul IPO. It is important that Saudis can first and foremost participate in the sale of the country's crown jewel.“As a comparison (peer group valuations IOCs like Exxon achieve multiples of around 11), Aramco will be higher. This has to be seen in the context that Aramco is the world's most profitable company by net income, which is bigger than the one of Alphabet Amazon and Microsoft combined," she said.

“While international investors will look at geopolitical risk after the attacks on Abqaiq and Khurais, this is mitigated by the fact that the company restored full production in under a month and capacity will be restored by the end of November.

She said: “The valuation will be of prime interest internationally. All in all Aramco is an extraordinarily well-run company.”


ALSO READ: Saudi Aramco IPO termed a 'unique investment proposition'


 

Who can take part?

All Saudi citizens and non-Saudi naturals who are resident in the Kingdom will able to take part in the share sale, as will other citizens of Gulf Cooperation Council member states.

There are incentives in the terms of the offer to encourage citizens to hold the shares for at least six months after trading begins, when they will receive a free bonus allocation of shares.

Nasser said: “Our mission is to provide our shareholders with long-term value creation through crude oil price cycles by maintaining our pre-eminence in oil and gas production, capturing additional value across the hydrocarbon value chain and profitably growing our portfolio.”

The share sale is expected to produce a rush of interest in the Kingdom, with some banks reported to be offering special loans for investors to take up their entitlement in the IPO.




A Saudi man monitors stock prices at Tadawul Saudi bourse in Riyadh on November 3, 2019. (AFP / FAYEZ NURELDINE)

Cash dividends

Nasser also mentioned the company’s intention to declare cash dividends of at least $75 billion.

An Aramco document stated: “Subject to the Board’s discretion after consideration of a number of factors, the Board intends to declare aggregate ordinary cash dividends of at least $75 billion with respect to calendar year 2020, in addition to any potential special dividends,” Aramco said.

“In addition, to the extent that the Board determines that the amount of any quarterly cash dividend declared with respect to calendar years 2020G through 2024G would have been less than $0.09375 per Share (based on 200,000,000,000 Shares outstanding) but for the Government forgoing its rights to such dividend as follows, the Government will forgo its right to receive the portion of cash dividends on its Shares equal to the amount necessary to enable the Company to first pay the minimum quarterly cash dividend amount described above to holders of Shares other than the Government,” the document said.

“The remaining amount available for distribution with respect to such quarter as determined by the Board in its discretion will then be distributed to the Government.”

Opinion

This section contains relevant reference points, placed in (Opinion field)

Aramco’s share price, number of shares to sold and the percentage of shares to be sold will be determined at the end of the book-building period, the oil giant said. The share offering will be open to individual and institutional investors but “subject to restrictions on the sale, disposition or issuance of additional shares, the details of which will be provided in the prospectus.”

The share offering would be in two tranches: one for institutional subscribers eligible to participate in the book-building process and another for individual investors comprise of Saudi Arabian nationals, non-Saudi individuals who are residents in the Kingdom and any GCC national.

“An eligible retail bonus investor who has been allotted shares and continuously and uninterruptedly holds the allotted shares for 180 days from (and including) the first date of trading and listing on the exchange will be eligible to receive one share for every 10 allotted shares so held, up to a maximum 100 bonus shares,” Aramco said.

“An eligible bonus investor would be entitled to receive up to a maximum of 100 bonus shares only.”

The Aramco document pegged the company’s revenue as of the third quarter to $244 billion; net income at $68 billion and a free cash flow of $59 billion. Its capex was listed at $23 billion as of the nine-month period.

 

Capital Market Authority's statement

Saudi Arabia’s Capital Market Authority (CMA) earlier on Sunday issued a statement saying Saudi Aramco’s application for the registration and offering of part of its shares has been approved.

Aramco’s prospectus will be published prior to the start of the subscription period, a statement from the CMA said.

The prospectus includes all relevant information that the investor needs to know before making an investment decision, including the company’s financial statements, activities and management.




Aramco’s prospectus will be published prior to the start of the subscription period, the CMA said. (Reuters)

The CMA’s approval on the application is valid for 6 months from the CMA Board resolution date, and would be deemed cancelled if the offering and listing of the Aramco’s shares are not completed within this period.

The CMA in its statement said, “a subscription decision without reading the prospectus carefully or fully reviewing its content may involve high risk. Therefore, investors should carefully read the prospectus, which includes detailed information on the company, the offering and risk factors.

“Thus, providing potential investors the ability to evaluate the viability of investing in the offering, taking into consideration the associated risks. If the prospectus proves difficult to understand, it is recommended to consult with an authorized financial advisor prior to making any investment decision.”

The regulatory agency added that approval on the application should “never be considered as a recommendation to subscribe in the offering of any specific company.”

“The CMA’s approval on the application merely means that the legal requirements as per the Capital Market Law and its Implementing Regulations have been met,” it said.


Saudi Arabia tops emerging markets league table

Saudi Arabia tops emerging markets league table
Updated 27 July 2021

Saudi Arabia tops emerging markets league table

Saudi Arabia tops emerging markets league table
  • Analysis in MSCI put Kingdom at the top of the list with a near 27% rise in market value

DUBAI: Saudi Arabia has been the best performing of all the emerging markets since the onset of the pandemic, according to new data from global information provider Refinitiv.

An analysis of 25 countries in the MSCI Emerging Market Index put Saudi Arabia, home to the Tadawul stock exchange in Riyadh, at the top of the list with a near 27 percent rise in market value since the start of 2020, when COVID-19 began to impact the global economy.

That compares with an average increase of just 1.6 percent in the overall index, and easily outstrips the 14.2 percent jump in the MSCI World Index of all countries.

Turkey was the worst performing of the emerging markets, with a 22.8 percent fall since the pandemic began, followed by Peru and Colombia, with drops of more than 20 percent. Of the other Middle East countries, Egypt witnessed a 6.5 percent decline, while Qatar barely grew, with just a 1.2 percent increase. 

The UAE placed second in the post-pandemic emerging market ranking, with a 21.3 percent rise.

Market experts said one of the reasons for the Kingdom’s outperformance was the authorities’ effective response to the economic recession brought on by the pandemic.

“The Saudi authorities were relatively quick to react with a series of measures, especially relating to smaller businesses, to help ease the burden of the pandemic economic effects, and the market has reacted to that,” Tarek Fadlallah, chief executive of Nomura Asset Management in the Middle East, told Arab News. 

The International Monetary Fund recently applauded the Kingdom’s pandemic response, as well as reforms to its capital markets that have enhanced its position as the biggest equities trading hub in the Gulf.

Tadawul has introduced derivatives trading which has broadened its appeal, especially to foreign investors accustomed to more sophisticated trading techniques.

HIGHLIGHTS

• Market experts said one of the reasons for the Kingdom’s outperformance was the authorities’ effective response to the economic recession brought on by the pandemic.

• The International Monetary Fund recently applauded the Kingdom’s pandemic response, as well as reforms to its capital markets that have enhanced its position as the biggest equities.

• Saudi Arabia’s market outperformance reflects its sustained course of economic transformation, along with liquidity boosting by the central bank, says expert.

“Saudi Arabia’s market outperformance and strong corporate valuations reflect its sustained course of economic transformation, along with liquidity boosting by the central bank,” financial expert Nasser Saidi told Arab News. 

“Economic and structural reforms, along with social liberalization policies, including opening up foreign markets to foreign investors, allowing for 100 percent foreign ownership in certain sectors, resulted in massive investment inflows.”

He highlighted the effect of the “policy-shattering” initial public offering of Saudi Aramco, and the steady stream of market flotations continuing this year, as a key feature of the Kingdom’s progress since the pandemic began.

The Saudi performance rates highly even in the context of rising global markets, buoyed by low interest rates and big government stimulus. New York’s S&P index has gained 33 percent since the onset of the pandemic.


Startup of the Week: Tuma Taiba feeding vegan needs

Startup of the Week: Tuma Taiba feeding vegan needs
Updated 26 July 2021

Startup of the Week: Tuma Taiba feeding vegan needs

Startup of the Week: Tuma Taiba feeding vegan needs

JEDDAH: Veganism has become a growing trend in Saudi Arabia with ever more people opting for a plant-based diet.

For some it is for health reasons, while for others it is a moral decision. As a result, supermarket shelves in the Kingdom have over the past four years seen an increase in stocks of vegan products.

In 2019, Amani Nouri, who gained a diploma in nutrition, founded Tuma Taiba — Arabic for good bite — in Jeddah, to cater for the burgeoning vegan market in the country.

“I chose to name it Tuma Taiba because good food is the foundation for a good body,” she told Arab News.

Her company offers vegan cheese spreads made from different nuts, and they come in flavors such as olives, pomegranate, and bell pepper. It also produces vegan and gluten-free pastries made with dates, sourdough bread, and kombucha tea in flavors including a mix of berries or apple, pineapple, and cinnamon.

The startup sold more than 500 products last year and aims to triple that amount this year.

Nouri said 85 percent of her diet was now plant-based after she made the decision to change her eating regime due to suffering from a number of health conditions that cleared up when she switched to a healthier diet.

“I suffered migraines once or twice a week to the point I needed strong painkillers, and this of course could hurt my kidneys and body in general.

“After I turned to the plant-based diet, I lost weight, I even look more youthful, all the pains and conditions I suffered from are cured, the cysts went away without any medication, and the hormonal imbalances too,” she added.

Family and friends encouraged Nouri to pursue the vegan business after trying her recipes. “On the insistence of family and friends, I started sharing my dishes with people because of the community’s need for different vegan-friendly food.”

She noted that the number of people in the Kingdom opting for vegan food was steadily increasing.

And some of her customers were non-vegans. “They find a delicious plant-based alternative that satisfies their tastes, and benefits their bodies, and notice the difference after eating more plant-based foods,” she said.

Tuma Taiba is planning to expand its product range and open a restaurant in the next couple of years.

• Details are available on Instagram @tumataiba.


Low interest rates boosted mortgage demand by 27% through May

Low interest rates boosted mortgage demand by 27% through May
Updated 26 July 2021

Low interest rates boosted mortgage demand by 27% through May

Low interest rates boosted mortgage demand by 27% through May
  • Residential real estate financing contracts offered to individuals by local banks reached 133,006 through May, with a value of SR69.5 billion

RIYADH: Mortgage lending in Saudi Arabia increased 27 percent this year through May, as interest rates decreased to between 1 percent and 4.9 percent, compared to about 6 percent early last year.

Residential real estate financing contracts offered to individuals by local banks reached 133,006 through May, with a value of SR69.5 billion, according to data from the Saudi Central Bank (SAMA).

Real estate financing grew by 50 percent compared with the same period in 2020 when SR46.6 billion was lent via 104,000 contracts.

“There is great competition between banks and real estate finance companies to obtain a greater share of the housing demand, after government support and joint financing programs with the Real Estate Development Fund (REDF), which led to an increase in the volume of lending for home purchases,” Riyadh-based Menassat Reality Co. CEO Khaled Almobid told Arab news.

“I expect more lending during the last quarter of this year despite the difficulties it is facing due to the rise in some housing prices in major cities and the lack of supply,” he said.

Saudi banks are offering mortgages with interest rates as low as 1 percent at Al Rajhi Bank, 2.5 percent at the Saudi National Bank (AlAhli Bank) and up to 4.5 percent at some banks.

Residential villas made up about 80 percent of the total financing, apartments 17 percent, while the purchase of residential lands’ financing made up the remaining 3 percent.

Saudi real estate financing achieved a record growth during the past three years, amounting to about 295,590 contracts, worth SR140.7 billion in 2020, compared to 22,259 financing contracts, worth SR17 billion in 2016, local media reproted citing SAMA data.


Lebanon sells cheapest Big Mac in the world as currency collapses

Lebanon sells cheapest Big Mac in the world as currency collapses
Updated 26 July 2021

Lebanon sells cheapest Big Mac in the world as currency collapses

Lebanon sells cheapest Big Mac in the world as currency collapses
  • Lebanese pound is 70 percent undervalued according to the Big Mac Index
  • A split is emerging between those paid in Lebanese pounds and those in dollars

RIYADH: Lebanon is home to the world’s cheapest Big Mac after the pound slumped in value, leaving it more than 70 percent undervalued against the US dollar, according to the Economist Intelligence Unit.

At 29,904 Lebanese pounds, a Big Mac is not cheap for those being paid in local currency, but with an exchange rate of 17,800 to the dollar, it costs just $1.68 for tourists and those lucky enough to get paid in dollars.

The slump in the Lebanese pound is exacerbating and accelerating inflation on a basic basket of goods, such as rice, sugar and flour, on a daily basis, said Lebanese economic analyst Bassel Al-Khatib.

Most people are paid in the local currency in Lebanon, where the national minimum wage stands at 675,000 Lebanese pounds per month, which was once worth almost $450 at the official exchange rate, but today barely fetches $30 on the black market, according to the Crisis Observatory at the American University of Beirut (AUB).

The Observatory said the cost of food has soared by 700 percent over the past two years, and this increase had picked up pace to 50 percent in the past few weeks alone.

Most Lebanese people are getting poorer on a daily basis, pushing some of them to sell their gold, cars and even furniture to survive, while others wait for US dollar transfers from their relatives abroad, or wait for civil society aid, Al-Khatib told Arab News.

This is all reflected in Lebanese social media, which is flooded with donation requests for new-born baby milk and medications that are not available anymore in the markets or are sold for extremely high prices. There are also numerous donation requests for people in need of food.

At the same time, others are sharing their expensive restaurant bills, such as Babel Baher who spent 5 million Lebanese pounds on a meal and posted the cheque on Facebook.

“$250 is almost nothing for someone coming from abroad,” a Facebook user called Rania wrote under the post. “This is a very cheap bill for someone who has US dollars and this dinner is not expensive at all compared to abroad.”

Al Khatib said that those paid in US dollars are living an affordable life with only $300 out of their salaries while before they needed $3,000 to have the same quality of life.

“The patchwork policies to support some commodities is not helping as all commodities that are subsidized are smuggled, ” said Al Khatib.

The country’s mismanagement with no plan or economic vision to save Lebanon from its worsening crisis, led us here, and there are no positive prospects as long as there are no radical solutions in the country, he said.


PIF-backed Lucid Motors makes trading debut on Nasdaq

PIF-backed Lucid Motors makes trading debut on Nasdaq
Updated 26 July 2021

PIF-backed Lucid Motors makes trading debut on Nasdaq

PIF-backed Lucid Motors makes trading debut on Nasdaq
  • will make itsLucid to make trading debut on New York’s Nasdaq Global Select Market on Monday
  • Lucid merged with special purpose acquisition vehicle Churchill Capital Corp. IV

RIYADH: Lucid Motors, the Californian electric vehicle (EV) carmaker majority-owned by Saudi Arabia’s Public Investment Fund (PIF), will make its trading debut on New York’s Nasdaq Global Select Market on Monday.

Listed under the new ticker symbol “LCID”, the listing came about following the merger of Lucid and Churchill Capital Corp. IV — a special purpose acquisition company — on July 23. The EV firm will begin trading by ringing the Nasdaq opening bell on July 26.


The deal will help Lucid raise $4.4 billion, which will be used to fast track its production growth plans. The firm has over 11,000 paid reservations for its Lucid Air vehicle, which is on scheduled to start deliveries in the second half of this year.

“We are on track to meet our projected deliveries for the next two years, and we look forward to delighting our customers around the world with the best electric vehicles ever created,” Peter Rawlinson, CEO and CTO of Lucid Group, said in a press statement.

Michael S. Klein, chairman and CEO of Churchill Capital Corp. IV, said ahead of the merger: “Lucid has industry-leading technology, clear demand for its products, and is on track to deliver revenue-generating cars to customers in the second half of this year. We are excited to support Lucid’s transition into a public company and confident in its ability to address unmet needs in the automotive industry, which is moving toward electrification at a rapid pace and on a global scale.”

PIF announced its investment in Lucid Motors in Sept. 2018. The Lucid Motors CEO told Arab News in January that his team were scrutinizing possible locations in Saudi Arabia to open retail outlets — what Lucid calls “studios” — for their luxury EVs.

“We are already looking,” he said. “My retail team just returned from a scouting trip in the Kingdom, and that is very much on the road there. Hopefully, we can get a retail outlet there right at the tail end of 2021, probably early 2022.”

Earlier this month, the Wall Street Journal reported that Saudi Arabia stands to record a profit of nearly $20 billion on the back of its investment in Lucid.

PIF will own over 60 percent of the company, which is expected to have a market capitalization of about $36 billion.

Lucid’s expected market capitalization is nearly twice the valuation of Nissan Motor Co. and about two-thirds that of Ford Motor Co., which delivered more than 4 million cars last year. Lucid has yet to sell any cars.

Looking at the market for EVs, a report by the Pew Research Center found that 7 percent of respondents said they currently owned an electric or hybrid vehicle, and 39 percent said they were very or somewhat likely to buy an EV when they next came to purchase.

Interest has grown, with 1.8 million EVs registered in the US in 2020, more than three times as many as four years ago, according to the International Energy Agency.

While the US accounts for 17 percent of the world’s 10.2 million EVs, China is the biggest market, with 44 percent of all cars and Europe following with 31 percent.