Fears abate as Saudi Aramco’s IPO is fully subscribed
A third of what’s likely to be the world’s largest share sale has been reserved for retail investors, who have been targeted by a Saudi ad campaign
Dubai — The retail tranche of Saudi Aramco’s initial public offering (IPO) is fully covered with one day to go after 3.7-million investors applied to buy shares in the world’s biggest oil producer.
The subscription reached 32.6-billion riyals ($8.7bn), lead manager Samba Capital said in statement. 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 countrywide advertising campaign and offered larger-than usual loans to finance purchases.
There may be a last-minute surge before Thursday’s final deadline for applications, 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 IPO 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.
The Saudi government plans to raise more than $25bn 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 modernise the country’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 December 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 retails 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 be identified before the deal is completed.
Proceeds from the sale will be transferred to Saudi Arabia’s sovereign wealth fund, which has been making a number of bold investments, ploughing $45bn into SoftBank’s Vision Fund, taking a $3.5bn stake in Uber and planning a $500bn futuristic city.