Retail investors snap up $10 billion Aramco shares

Retail investors snap up $10 billion Aramco shares
Saudi Aramco’s research and development center in Dhahran. (AFP)
Updated 29 November 2019

Retail investors snap up $10 billion Aramco shares

Retail investors snap up $10 billion Aramco shares
  • Offer likely to be oversubscribed when bigger institutional tranche closes next week and will be priced at top of the range
  • The institutional tranche of the Saudi Aramco IPO remains open for another week

DUBAI: Saudi Arabian investors have gone for the retail trance of the Saudi Aramco initiative public offering (IPO) in their millions, with the record-breaking share offer fully subscribed even before it closes.

That outcome makes it virtually certain that the offer will be oversubscribed when the bigger institutional tranche closes next week, and will be priced at the top of the range, making it the biggest IPO ever. 

Samba Capital, the lead manager for the offering, said that some 4.17m nationals, resident expatriates and eligible GCC citizens had taken up the offer, committing SAR38.1bn ($10.16bn) to purchase 1.9bn shares in Aramco, or 0.5 per cent of its total capital.

Rania Nashar, Samba deputy chairman, said: “The growing level of demand among retail investors - as reflected in the day to day subscription results - is demonstrative of the high level of confidence in Saudi Aramco’s investment proposition and the promising financial prospects of the company.

“Furthermore, the IPO results reflect the belief of the investment community and the Saudi population in the economic and strategic direction the Kingdom is taking,” she added.

Advisers to the IPO believe that the level of subscriptions could top 5 million by the time the retail trace closes, easily beating the previous record for IPO subscriptions set by National Commercial Bank.

They were also encouraged by the fact that well over half of the new Aramco shareholders bought shares via ATMa and via internet banking, as opposed to personal visits to banking branches. “That shows a level of sophistication among the new shareholders. They did their homework properly,” said one adviser.

Retain investors outside the Kingdom can still buy an interest in the IPO via specialist finds set up in other jurisdictions that operate as qualified financial institutions in Saudi Arabia. Dubai-based Dalma Capital is one of the firms offering investors products that will allow non-Saudi investors to access the IPO from outside the Kingdom.

The institutional trance of the offer - comprising at least a further 1 percent of the total -  remains open until for another week. Aramco executives are marketing the IPO in region financial centers like Dubai and Abu Dhabi, and big institutional investors in the UAE, Kuwait and elsewhere are believed to be considering taking substantial stakes in the IPO.

Aramco and its advisers decided not to market the IPO in other financial centers in Europe and north America after they were satisfied it would attract sufficient interest in the Middle East and Asia. But western financial institutions can still buy shares in the offer via the Tadawul, which has relaxed the rules specially for the IPO.

Some western institutions intend to buy Aramco shares to meet their commitments under their passive investment  requirements that oblige them to buy the constituent stocks  in certain indices.