Thursday, 21 November, 2019

Saudi Aramco unveils next stage of blockbuster flotation

Saudi Aramco unveils plans to kick off blockbuster float next week Saudi Aramco prospectus confirms offer up to 0.5% of shares to individual investors
Ginger Lawrence | 10 November, 2019, 20:37

Energy giant Saudi Aramco, the world's largest company, has lifted the lid on its secretive operations in a prospectus ahead of a highly anticipated listing on the Riyadh stock exchange.

The prospectus said the state giant will sell up to 0.5 percent of its shares to individual investors while it has still not decided on the percentage for larger institutional investors. The offering, set to rank it as the world's most valuable company, will begin on November 17, the prospectus said.

The document listed a number of risks for prospective investors to consider, including how the company's cash flow is significantly impacted by global crude oil supply and demand and the price at which it is able to sell crude oil.

The company said it will determine the percentage to be sold t o institutional investors after consultations with its financial advisors and global coordinators consisting of major worldwide banks.

The oil and gas sector is half the country's gross domestic product and about 70 percent of its export earnings. Although one of the attractions for investors is the potential of high dividends, the document said Aramco has the right to change dividend policy without prior notice.

Saudi Arabia's oil firm Aramco is an important crude oil supplier to Japan, holding more than a third of Japanese imports.

There are concerns about the extent to which the interests of new investors in the company will be protected, the NYT said.

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After the flotation, Aramco will not list any more shares for six months, the prospectus says.

Japanese investors will probably steer clear of Aramco's IPO despite the fact that Saudi Arabia holds a significant share of Japan's crude oil imports.

Aramco has been in talks with Gulf and Asian sovereign wealth funds and wealthy Saudi individuals to secure top investors of the IPO, but no anchor investor is yet to formally agree to a deal. While some argue that the company's valuation may miss a $2 trillion valuation target, if Aramco reaches the figure, it will surpass the previous record-setting IPO reached by Chinese e-commerce giant Alibaba.

The oil and gas company had profits of $111 billion a year ago, more than Apple, Royal Dutch Shell and Exxon Mobil combined.

The world's most profitable company has published more details about its planned stock market flotation.

"Due to its size and likely free float, Aramco should be eligible for fast-track inclusion in both the FTSE and MSCI Emerging Market indices within 10 days of the IPO", said Dominic Bokor-Ingram, senior portfolio manager, frontier markets, Fiera Capital (Europe).