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Saudi Aramco announces plans to scale back preparations for flotation

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Saudi Aramco announces plans to scale back preparations for flotation

November 28
16:56 2019
Saudi Aramco announces plans to scale back preparations for flotation
Saudi state oil firm, Aramco, reportedly scraps plans to market shares to investors outside the Middle East

Saudi Aramco has reportedly ruled out a formal investor roadshow across the globe, including Asia, the US, and Europe. This is coming a few weeks before a planned initial public offering on Riyadh’s Tadawul stock exchange.

The executives of the oil giant were expected to meet with major institutional investors in different parts of the globe over the coming weeks, as they look to promote the company in the run-up to its public listing early next month. This has been described as the latest blow to Aramco’s long-awaited market debut, as the company looks to focus on investors in Saudi Arabia and the Gulf.

The company aims to sell a stake in its vast oil wealth, raising over $30bn (£23bn) for the government and ultimately helping to modernize the Saudi economy while gaining a foothold in the international investment community.

The early plans had prompted a fevered interest among many investors, including international banks and stock exchanges eager to lay claim to a piece of the world’s most profitable company.

Despite Aramco’s eye-watering profits, the interest from global investors has declined in recent months due to concerns over the company’s ties to the government. Major international investors have already started to express their skepticism over the $2tn valuation set by Crown Prince Mohammed bin Salman. On the contrary, investors have estimated the company’s value to be between $1.2tn and $1.5tn.

A Guardian investigation revealed that Aramco was the world’s most polluting company, with its oil output amounting to about 4.4% of the world’s total carbon dioxide and methane emissions since 1965. The company is also expected to lead the growth in fossil fuel production between 2018 and 2030.

The latest IPO plans confirmed that it would sell up to 1.5% of the company at between 30 and 32 riyal a share, valued at between $1.6tn and $1.7tn. At this price, the IPO would raise between $24bn and $25.6bn to help in reforming the Saudi economy.

Aramco has reserved about 0.5% for Saudi retail investors, with promised tax cuts and a $75bn-a-year minimum dividend as incentives. Two-thirds of the shares are expected to be bought by institutional investors in the Middle East, with some support from investors in China and Russia.

The exact price of Aramco’s shares will be announced by the company on 4 December and will begin trading on the Tadawul market a week later.

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