Saudi Aramco Limits IPO to Saudi Investors

This past weekend, the Saudi government decided that it would limit its IPO to Saudi investors and refrain from a roadshow. The state-owned oil giant announced in early November that it would sell a portion of the state-owned company and begin to market the IPO around the globe. This past weekend, Aramco decided it would limit the sale of its share to Saudi investors and would no longer market the IPO to investors around the globe.

What Was the Issue?

The Saudi government believed that Saudi Aramco is worth up to $1.7 trillion at the price range set by the oil giant, and at one point was looking for a valuation of $2 trillion sought by Saudi’s crown prince. Unfortunately, this grand valuation was not confirmed by the market, or analysts working for the Saudi government.

Aramco decided it will not sell shares directly to US investors or other markets, as the initial public offering will be restricted to Saudis and those foreign institutions permitted to invest in the kingdom’s stock market, according to reports. Saudi Aramco is not planning to see a small portion of the company to the public, in Saudi Arabia. The total number of shares is expected near 3-billion which will equal approximately 1.5% of the company value.

How Much is Aramco Worth؟

The price range for the IPO is expected to be within a range between 30 riyals and 32 riyals which would provide a value of approximately 96 billion riyals. When converting this number to US dollars, which can be viewed through an online investing platform, it would push the value of the company to a range between $1.6 and $1.7 trillion. While this number is below the initial $2 trillion the crown price desired will allow the company to claim it is the largest public company in the world.

What Was Removed from the Original Prospectus?

According to reports, the original prospectus was targeted to investors within the United States. The prospectus noted Regulation S of the United States Securities Act of 1933, and inside the United States under Rule 144A of the U.S. Securities Act. The release prospectus removed any reference to such regulations. Aramco stated that the initial public offering was delayed because the company needed to start a process to acquire a 70% stake in petrochemicals maker Saudi Basic Industries Corp. Once this was complete they could move forward with the Aramco IPO.

Who Will Participate?

Retail investors within Saudi Arabia will not have until November 28 to sign up for the IPO while institutional investors can subscribe until December 4, 2019. There are several reasons the value did not reach higher levels. Recent attacks on the Saudi infrastructure in conjunction with issues related to the Crown prince and the murder of Saudi journalist Jamal Khashoggi, created outside risks that could have limited the value to outside investors.

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