The ‘Goldilocks’ level in the Aramco IPO — $8.75 a share

Saudi Aramco has published more details about its planned stock market flotation. (File/Reuters)
Updated 12 November 2019

The ‘Goldilocks’ level in the Aramco IPO — $8.75 a share

  • There are currently 200 bn shares in existence in Saudi Aramco
  • 0.5 percent of the shares will be targeted at private shareholders

DUBAI: Enough clues are emerging from the Saudi Aramco prospectus for the forthcoming initial public offering (IPO) to make an informed guess about what the price per share will be when the stock is finally priced on Dec. 4 ahead of Tadawul trading a few days later.
I must stress that I am not the recipient of any inside information in this respect, merely an observer of stock market dealings and IPOs going back to the 1980s — long before they became known as IPOs and were usually called “floats” or listings.” But my logic goes like this.
We know that there are 200 billion shares in Saudi Aramco in existence — that’s in the prospectus — and we know that about 0.5 percent of them will be targeted at private shareholders — Saudi nationals, resident expats who bank at the right place and GCC citizens — in the IPO.
So that means 1 billion shares, give or take a few maybe, will be offered to investors in the non-institutional tranche of the offering.
Of course, we don’t know yet what the total market capitalization of Aramco will be once the book-building process is completed. That will depend largely on demand among the big global institutions.
But the range of values produced by the banks advising on the IPO is huge — from a low of $1.2 trillion to a high of $2.3 trillion. It is unlikely the IPO would go ahead at below $1.5 trillion, and more than $2 trillion just seems exorbitant, even in the Kingdom’s wildest dreams.
So let’s assume a “Goldilocks” mid-way point of $1.75 trillion — not too hot for the international buyers, not too cold for the vendors.
That would equate to a price of $8.75 per share, meaning that the private shareholder tranche would be looking to raise $8.75 billion, or roughly $260 from each man, woman and child in the Kingdom’s population of 33.4 million.
That does not seem too excessive for the IPO of a lifetime.


Saudi companies display latest technologies at Dubai Airshow

Updated 17 November 2019

Saudi companies display latest technologies at Dubai Airshow

DUBAI: Over 25 Saudi companies and government institutions are taking part in the Dubai Airshow hoping to snag deals for their latest defense and aviation technologies being showcased at the biennial event.

The Middle East’s biggest aviation gathering opened on Sunday sans major announcements for big-ticket aircraft purchases from Gulf flagship carriers, maybe also due to dozens of deals already been previously signed and the planes just waiting to be delivered.

Among the major Saudi companies in the event include the Saudi Arabian Military Industries (SAMI), fully owned by the Public Investment Fund, which has operations from aeronautics, land systems, naval systems, weapons and missiles and defense electronics.

SAMI aims to become among the top 25 companies globally by 2030 and to localize military spending, in line with the Kingdom’s vision.

Among other notable Saudi companies and institutions with a presence at the airshow are Saudi Airlines, flynas, The General Authority of Civil Aviation and the King Abdulaziz City for Science and Technology.

Meanwhile, Saudi INTRA Defense Technologies signed a Memorandum of Agreement with multinational defense company Hensoldt for the co-development and co-production of advanced electro-optic systems, as well as a joint venture agreement with EM&E for the transfer of technology and localization of the precision mechanical industries in the Kingdom.

ESEN Saudi, a hi-tech defense and aerospace engineering and production company, was also launched at the Dubai Airshow’s opening day.

Middle East Propulsion Company, which specializes in maintenance, repair and operations (MRO) for the Middle East, was also one of the Saudi companies on site. The company, which boasts of a workforce comprised of Saudi nationals of about 80 percent, aims to expand their services across the GCC and wider Middle East region.

Al-Salam Aerospace Industries meanwhile has on display latest advancements in the manufacture of key components for the F-15 fighter jet.