Saudi Aramco to offer 1 billion shares to private investors in world’s biggest IPO

Saudi Aramco prospectus confirms to offer up to 0.5% of shares to individual investors it was announced on Saturday. (Reuters/File Photo)
Updated 11 November 2019

Saudi Aramco to offer 1 billion shares to private investors in world’s biggest IPO

  • Saudi Aramco could eclipse the $25 billion IPO of Alibaba in New York
  • Bookbuilding starts for both tranches of investors on November 17

Saudi Aramco is looking to sell 0.5 per cent of its shares to private investors – Saudi nationals, qualifying resident expatriates, and GCC citizens – as part of the record breaking initial public offering of shares in the most profitable company in history.

The percentage allotted to private shareholders was officially confirmed for the first time in the formal prospectus for the share offer on the Tadawul stock exchange, along with a wealth of information about the world’s biggest oil company.

With 200 billion Aramco shares current owned by the government, the amount targeted towards private shareholders would be 1bn shares.

The 658-page document was filed on the website of the Capital Markets Authority (CMA) – the Saudi regulator – late on Saturday night, following approval by the CMA for the IPO last week.

It still lacks crucial information on the sale – like the total percentage of the company to be sold, the level at which the shares will be priced, and an estimate of the total value OF Aramco.

But the prospectus will be pored over by private investors and foreign investing institutions as they weigh up whether to invest in the most profitable company in the world - and how much of their funds to allocate to the IPO.

If the IPO goes ahead at previously indicated levels, it could easily beat the previous record share sale, the $25bn offering of stock in Alibaba on the New York Stock Exchange.

Aramco executives, bankers and other investment advisers will now embark on a whirlwind tour of Saudi, Gulf and international investors to gauge support for the IPO – a process known as “bookbuilding” – after which the final financial aspects of the offer will be determined.

Bookbuilding starts for both tranches of investors on Nov. 17, and end on Nov. 28 for individual investors, and on Dec. 4 for investing institutions.

Private investors who buy shares in the IPO, and who hold them for a period of six month after trading begins in December, will receive bonus shares up to a total of 100 shares, the prospectus confirmed.

The government of Saudi Arabia, which current owns the shares, has undertaken to sell no more for a six-month period after trading begins, nor can Aramco issue more shares in that period.

Although the IPO at this stage is a Tadawul-only launch, the government has said that in the future it could consider selling further shares on a foreign stock exchange.

The prospectus also recognizes “foreign strategic investors” as a source of potential demand for the IPO, opening up the possibility that big foreign wealth funds in Asia or elsewhere may want to get involved in the offering. There has been speculation that Chinese financial groups could be interested, as well as sovereign wealth funds in other GCC countries.

The prospectus also contains detailed information on Aramco’s estimates of demand growth for its key crude product, as well as data on the Kingdom’s oil reserves, refining capacity and governance procedures.

As is standard in all share prospectuses, there is also a detailed analysis of the risks involved in investing in the shares.


Egypt’s sovereign wealth fund to raise authorized capital five-fold up to $62.15 billion

Updated 12 November 2019

Egypt’s sovereign wealth fund to raise authorized capital five-fold up to $62.15 billion

  • Egypt’s parliament passed a law allotting 5 billion Egyptian pounds of start-up capital for the fund last year
  • Abdel-Fattah El-Sisi: Egypt could dramatically expand the size of its new sovereign wealth fund to ‘more than several trillion pounds’

CAIRO: Egypt’s sovereign wealth fund is expected to increase its authorized capital to up to a trillion Egyptian pounds ($62.15 billion) from 200 billion pounds within three years, depending on investors’ appetite, the fund’s executive director said.
Last year, Egypt’s parliament passed a law allotting 5 billion Egyptian pounds of start-up capital for the fund, called the Egypt Fund, with 1 billion pounds to be transferred immediately from the treasury.
The law also allows the president, who picks the board of directors, to transfer the ownership of any unused state assists to the fund or to any of the fund’s assists or companies.
“We expect to increase our licensed capital within three years to a trillion pounds or less ... it all depends on the investors’ response and investment appetite,” said Ayman Soliman, the fund’s chief executive.
“The sectors we will work in include industry, traditional and renewable energy, tourism and archaeology,” Soliman said.
President Abdel-Fattah El-Sisi said last month that Egypt could dramatically expand the size of its new sovereign wealth fund to “more than several trillion pounds,” and that it “aims to contribute to sustainable economic development through management of its funds and assets.”
The fund plans to buy a stake of about 30 percent in power plants built by Siemens, Soliman said, adding that six international investors have expressed interest.
“So far, six companies submitted offers to the Electricity Holding company to buy shares in the Siemens power plant,” Soliman said.
The plants, billed at the time as the world’s biggest, were built by Siemens in a €6 billion ($6.61 billion) deal signed in 2015. El-Sisi inaugurated them last year.
In May, Electricity Minister Mohamed Shaker said that the government is considering selling the power plants to private investors, but talks were still at an early stage.