Saudi Aramco IPO’s retail tranche oversubscribed ahead of deadline

Photo: Saudi Aramco

The retail tranche of Saudi Aramco’s initial public offering is more than fully covered with one day to go after 4.2 million investors applied to buy shares in the world’s biggest oil producer.

The subscription reached 38.1 billion riyals ($10.2 billion), lead manager Samba Capital said in statement, equivalent to about 120% of the portion set aside for retail investors. The deal for applications falls at midnight tonight local time.

A third of what’s likely to be the world’s largest share sale has been reserved for retail investors, who’ve been targeted by a country-wide advertising campaign and offered larger-than-usual loans to finance purchases.

There may be a last-minute surge, but so far the share sale hasn’t been as well subscribed as some other IPOs in the country. The book for National Commercial Bank’s 2014 initial public offering was covered 23 times over. In 2006, 10 million Saudis, about half the kingdom’s adult population, applied to buy shares in the local unit of the Middle East’s biggest property develop, Emaar Properties PJSC.

The Saudi government plans to raise more than $25 billion by selling a 1.5% stake in the company at a valuation of between $1.6 trillion and $1.7 trillion. Of that, 1% is earmarked for institutional investors and the rest for Saudi retail buyers.

The Aramco IPO, a central element in Crown Prince Mohammed bin Salman’s plan to modernize the kingdom’s economy, will rely almost exclusively on local money after international investors balked at the valuation. Many of the richest Saudi families have been pressed to invest, including some who had members held in the Riyadh’s Ritz-Carlton hotel during the corruption crackdown in 2017.

Aramco is still seeking to drum up support from institutional investors in the region, making pitches in Dubai and Abu Dhabi this week. Abu Dhabi plans to put as much as $1.5 billion into the offering, while the Kuwait Investment Authority is considering a potential investment, according to people with knowledge of the matter. Institutional book-building closes on Dec. 4, before the IPO’s final pricing the next day.

Earlier this week, Samba said the institutional tranche of the IPO was already 90% covered.

The banking system is also being used to boost demand. The Saudi Arabian Monetary Authority is allowing smaller retail investors to borrow twice their cash investment, double the leverage limits the regulator normally permits for IPOs. Some Saudi companies paid employees early to free up cash to spend on shares.​

Some retail investors may end up investing in the institutional offering through the special purpose vehicles offered by local banks, according to people familiar with the matter, asking not to be identified before the deal is completed.

Proceeds from the sale will be transferred to the kingdom’s sovereign wealth fund, which has been making a number of a bold investments, plowing $45 billion into SoftBank Corp.’s Vision Fund, taking a $3.5 billion stake in Uber Technologies Inc. and planning a $500 billion futuristic city.

Key details:

  • Price range: 30 riyals ($8) to 32 riyals per share
  • Retail subscription period: Nov. 17-Nov. 28
  • Institutional book-building period: Nov. 17-Dec. 4
  • Final price and valuation on Dec. 5
  • Refund of excess subscription amount to individual investors: Dec. 12
  • Listing date for Aramco shares still to be announced

Bloomberg

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.