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.


US trade offensive takes out WTO as global arbiter

Updated 10 December 2019

US trade offensive takes out WTO as global arbiter

  • Two years after starting to block appointments, the US will finally paralyze the WTO’s Appellate Body
  • Two of three members of Appellate Body exit and leave it unable to issue rulings

BRUSSELS: US disruption of the global economic order reaches a major milestone on Tuesday as the World Trade Organization (WTO) loses its ability to intervene in trade wars, threatening the future of the Geneva-based body.
Two years after starting to block appointments, the United States will finally paralyze the WTO’s Appellate Body, which acts as the supreme court for international trade, as two of three members exit and leave it unable to issue rulings.
Major trade disputes, including the US conflict with China and metal tariffs imposed by US President Donald Trump, will not be resolved by the global trade arbiter.
Stephen Vaughn, who served as general counsel to the US Trade Representative during Trump’s first two years, said many disputes would be settled in future by negotiations.
Critics say this means a return to a post-war period of inconsistent settlements, problems the WTO’s creation in 1995 was designed to fix.
The EU ambassador to the WTO told counterparts in Geneva on Monday the Appellate Body’s paralysis risked creating a system of economic relations based on power rather than rules.
The crippling of dispute settlement comes as the WTO also struggles in its other major role of opening markets.
The WTO club of 164 has not produced any international accord since abandoning “Doha Round” negotiations in 2015.
Trade-restrictive measures among the G20 group of largest economies are at historic highs, compounded by Trump’s “America First” agenda and the trade war with China.
Phil Hogan, the European Union’s new trade commissioner, said on Friday the WTO was no longer fit for purpose and in dire need of reforms going beyond just fixing the appeals mechanism.
For developed countries, in particular, the WTO’s rules must change to take account of state-controlled enterprises.
In 2017, Japan brought together the United States and the European Union in a joint bid to set new global rules on state subsidies and forced technology transfers.
The US is also pushing to limit the ability of WTO members to grant themselves developing status, which for example gives them longer to implement WTO agreements.
Such “developing countries” include Singapore and Israel, but China is the clear focus.
US Commerce Secretary Wilbur Ross told Reuters last week the United States wanted to end concessions given to then struggling economies that were no longer appropriate.
“We’ve been spoiling countries for a very, very long time, so naturally they’re pushing back as we try to change things,” he said.
The trouble with WTO reform is that changes require consensus to pass. That includes Chinese backing.
Beijing has published its own reform proposals with a string of grievances against US actions. Reform should resolve crucial issues threatening the WTO’s existence, while preserving the interests of developing countries.
Many observers believe the WTO faces a pivotal moment in mid-2020 when its trade ministers gather in a drive to push through a multinational deal — on cutting fishing subsidies.
“It’s not the WTO that will save the fish. It’s the fish that are going to save the WTO,” said one ambassador.