Banks gear up for Aramco’s digital IPO

Banks gear up for Aramco’s digital IPO
FILE PHOTO: An employee in a branded helmet is pictured at Saudi Aramco oil facility in Abqaiq, Saudi Arabia October 12, 2019.(Reuters)
Updated 13 November 2019

Banks gear up for Aramco’s digital IPO

Banks gear up for Aramco’s digital IPO
  • On Nov. 17, Aramco will publish a minimum and maximum range for the share price

DUBAI: Aramco yesterday issued guidelines on the private tranche of the IPO, which said: “Individual investors who have recently participated in IPOs in the Kingdom can also subscribe through the Internet, mobile applications, telephone banking or ATMs at any of the Receiving Entities branches that offer any or all such services to its customers,” provided they have accounts there and their personal details have not changed recently.

The 13 banks officially designated are: NBC, SAAB, Samba, Al Rajhi, Alawwal, Alinma, Arab National, Albilad, Aljazira, Banque Saudi Fransi, Gulf International, Riyadh and Saudi Investment Bank.

Some advisers to the IPO believe that Saudi investors may be confused by the concept of “bookbuilding,” the process by which the shares will eventually be priced and allocated, which has been only rarely used in the past. In the guidelines, the process is set out.

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On Nov. 17, Aramco will publish a minimum and maximum range for the share price. Investors will decide how many shares they want to buy at the top end of that range, which will also determine how much they want to spend in the IPO.

For private investors, the bookbuilding period closes on Nov. 28, and the final price of the shares will be announced on Dec. 5, after the bigger institutional bookbinding is complete. Private investors must pay for the shares.

If there are applications for more than the 0.5 percent on offer — amounting to 1 billion shares — allocations to private investors will be scaled back proportionate to demand; if there are fewer applications than the 0.5 percent when all maximum applications are satisfied, private investors can have the over-payment refunded either in cash via the receiving banks or in the form of extra shares in Aramco.

There is an incentive mechanism in the IPO whereby Saudi investors will receive a bonus one-for-ten allocation of shares, up to a maximum of 100 shares, if they do not sell shares in the market for a period of six months after dealings begin in December, at a date still to be determined.