Aramco IPO retail portion oversubscribed with SAR47.4bn in orders

Saudi Aramco completed the retail portion of its initial public offering (IPO) with $12.64 bn (SAR47.4bn) in orders on Thursday, according to SambaCapital, the IPO’s lead manager.

The energy giant is offering 1.5%, or three billion, of the company’s shares on the Saudi Stock Exchange (Tadawul) at an indicative price range of $8-$8.53 (SAR30-SAR32).

A third of those shares, 0.5%, are allocated to retail, or individual investors.

At the higher end of this price range, Aramco’s retail portion ended its sale 1.48 times oversubscribed.

SambaCapital said, the shares sold amounted to 1,481,613,280.

The firm added that institutional investors had put orders for SAR118.86bn during the first 12 days of the book building process.

The deadline to submit bid forms for institutional investors, such as banks or hedge funds, is set for Dec. 4, while the deadline for retail investors, which starts Nov. 17, was on Nov. 28.

According to the IPO prospectus, Saudi Arabian retail investors that hold their shares for a minimum of 180 days, or six months, would be eligible for a 10-percent discount through the allocation of additional bonus shares.

The proceeds from the listing will go towards diversifying the Saudi Arabian economy away from oil, and could be invested in sectors such as logistics, mining, or developing the manufacturing and industrial economy.

“We understand that the bulk of the funds raised will go to the government or the Public Investment Fund, potentially adding to the sovereign’s already strong fiscal net asset position of 72.7% of gross domestic product (GDP),” S&P said in a note on Saudi Aramco’s IPO.

“Productively deployed, we believe the assets could also help maintain growth potential through our three-year ratings horizon,” S&P added.

Muneera Al-Dossary, chief executive officer of Riyadh-based Mulkia Investment Company, had predicted at the launch of the IPO that Aramco will be on a fast-track inclusion on the global index provider, MSCI — a step that would support the stock price further through demand and liquidity after listing.

MSCI, which is used by funds that manage trillions of dollars around the world, recently said that if Saudi Aramco starts trading on the Tadawul on or before Dec. 12, that it would add the company to the MSCI equity indexes from Dec. 17. Otherwise, the company would have to wait to be considered for inclusion after Jan. 5, 2020.

“We’ve seen institutional and individual investors very interested in the IPO, as the company enjoys a strong track record,” Al-Dossary said, adding that Mulkia will subscribe to the IPO through the funds that it manages.

It was also revealed this week that the sovereign wealth funds of Abu Dhabi and Kuwait too plan to invest. In addition, Saudis have been eager to buy shares, with many seeking to invest on behalf of their dependents to increase the number of shares they can buy. 

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