Retail subscription for Aramco share sale reaches $5.8bn

Saudi Aramco is offering a 1.5 per cent stake to retail and institutional investors in the kingdom

Receipts from Aramco's share sale will be chanelled into the kingdom's sovereign Public Investment Fund, which has become a savvy global investor in recent years. Bloomberg

Saudi Aramco received subscriptions of 21.77 billion Saudi riyals (Dh21.3bn) for its initial public offering from retail investors, according to lead manager Samba Capital.

Retail investors have subscribed for 680,254,540 of the shares offered at 32 riyals per share, which was the top-end of the energy company's 30-32 riyal price range, the bank said in a note released late on Monday evening.

Subscription for the retail tranche of potentially the world's biggest share float will close on November 28.

Saudi Aramco, the world's largest oil exporting company, has offered 0.5 per cent of the company's shares to retail subscribers. A total of 1.5 per cent of the company, or about 3 billion shares, are being offered to retail and institutional investors through Saudi Aramco's stock market listing on the domestic exchange, Tadawul, the biggest bourse in the Arab world.

The price range suggests an indicative valuation of between $1.6 trillion and $1.7tn (Dh5.9tn to Dh6.2tn) for the company once its shares are floated, an exercise which could take place next month.

Aramco is the top integrated oil and gas company in the world, producing one in every eight barrels of crude. In 2018, the company produced 13.6 million barrels per day of oil equivalent, including 10.3 million bpd of crude.

The Aramco IPO is central to Riyadh's ambitions to transform the kingdom's economy. Funds from the share sale are also expected to boost spending on Vision 2030 projects such as the $500bn futuristic economic free zone, Neom and the Red Sea Project, a mega-tourism attraction. The country is aiming to open up its tourism and entertainment sector.

The receipts from the stake sale, which will be channelled into the kingdom's sovereign wealth fund, the Public Investment Fund (PIF), would "boost economic growth if invested locally," Al Rajhi Bank said in a note.

The PIF fund has become a savvy global investor in recent years with stakes in technology firms such as ride-hailing app Uber, and electric car makers Tesla and Lucid. The bank, however, cautioned against flows of investment outside the kingdom, saying it would cause a decline in foreign reserves as well as the loan-to-deposit ratio of the banks in the kingdom.

Based on an estimate of 32 Saudi riyals per share, analysts from Al Rajhi Capital expect 96bn Saudi riyals to be raised from the sale of shares, with 90bn riyals of demand expected to come from the local market. The remaining capital will flow from qualified foreign investors.

Of the 90bn Saudi riyals raised from the local market, institutional investors are projected to account for 58bn Saudi riyals, with the remaining 32bn Saudi riyals coming from the retail segment.

"The number of retail subscribers in the past IPOs has touched 10 million. If we are to assume a similar number of subscribers, it comes down to only 3,200 Saudi riyals per person," the bank said in the note.

Al Rajhi Capital also said that at the lower end of its price range of 30 riyals, Saudi Aramco would have a weighting in the Tadawul All-Share index of 9.1 per cent, which should attract 3.7bn riyals of passive inflows from foreign investors in the MSCI and FTSE Russell Emerging Market indexes.

If valued at 32 riyals per share, it would have a total weighting of 9.7 per cent of the index and attract 3.9bn riyals of passive flows from foreign investors.