A tranche of the Aramco IPO which was opened for non-professional ‘retail' investors and institutional investors has been oversubscribed by 1.7 times, the lead manager Samba Capital said on Friday.
The total value of bids submitted in the first 12 days of the offer was $44.3 billion, which was for the $25.6 billion of shares that are on offer.
Interest in the IPO seems to have been relatively muted, however, as the last big IPO in the kingdom, that of the kingdom’s National Commercial Bank in 2014, was oversubscribed by 23 times for the retail portion.
According to Reuters, the sovereign wealth funds of Abu Dhabi and Kuwait will also be investing in the IPO.
The largest IPO in history was that of Alibaba, which set a record of $25 billion in 2014. Aramco was initially thought to surpass this, but this remains uncertain at present.
The initial plan of the company and of Crown Prince Muhammad bin Salman was to value the government at $2 trillion and raise $100 billion by selling up to five per cent of its shares. However, investors' enthusiasm was dampened by the August 17 attacks on an Aramco refinery that cut the company’s output by half.
The final amount being sold was just 1.5 per cent of the company’s value for a valuation of $1.7 trillion. This would raise about $25 billion in total.
Bloomberg reported that many banks had offered a much-lower valuation; Bank of America’s lower-range estimate was $1.2 trillion.
In addition, shares will not be sold directly to investors outside the kingdom, with only Saudi nationals and a list of foreign institutions allowed to invest in it, as the IPO is being hosted on the Saudi Tadawul stock exchange. For outsiders to invest, they will have to do so through a Saudi brokerage who can make transactions on their behalf, or through global mutual funds that invest in the IPO.
As the most profitable company in the world, Aramco was wholly-owned by the Saudi government, which controls the oil and the land that Aramco source from. The IPO was planned as part of the Saudi Vision 2030 reform project to develop the kingdom from being an oil economy to being a powerful player in other segments.
The offering period for institutional investors is between November 17 and December 4, while for retail investors it is between November 17 and November 28.
