Slice of Aramco IPO earmarked for small investors oversubscribed

The portion of Saudi Aramco’s initial public offering (IPO) earmarked for non-professional investors (so-called “retail” investors) has been oversubscribed, with orders reaching 38.1 billion Saudi riyals ($10.2bn), lead manager Samba Capital said on Thursday.

The state oil giant plans to sell a 1.5 percent stake, or about three billion shares, and has said at least one-third of the sale is expected to be covered by retail investors, who have until Thursday to sign up. 

With an indicative price of 30-32 riyals, the IPO is valued at as much as 96 billion riyals ($25.6bn) and gives the firm a market value of $1.6-1.7 trillion.

If it tops the $25bn set by China’s Alibaba in 2014, the Saudi Aramco IPO will rank as the world’s largest ever.

About 4.17 million retail investors had subscribed to 1.19 billion shares by 12:00pm GMT on Thursday, injecting 6.13 billion Saudi riyals ($1.6bn) above the amount needed for full coverage, Samba said.

Subscription will continue until midnight on Thursday and final results will be announced on Friday, it said in a statement.

The Saudi Aramco debut share sale is the centrepiece of Crown Prince Mohammed bin Salman‘s (MBS) Vision 2030 plan to diversify the Saudi economy away from its reliance on oil. Aramco is the crown jewel of the economy and the world’s most profitable company.

Sources told Reuters News Agency this week that the sovereign wealth funds of Abu Dhabi and Kuwait plan to invest.

The government has encouraged wealthy Saudis to invest, with many viewing it as an opportunity to show their patriotism after a September attack on Aramco facilities that laid bare the vulnerability of the kingdom’s oil infrastructure.

Washington and Riyadh blamed regional rival Iran for the attacks, which temporarily cut more than 5 percent of global oil output. Tehran denied any involvement.

Saudi banks are facilitating loans for local retail investors to buy Aramco shares. 

Aramco is relying on local and regional demand to pull off the deal, after cancelling marketing roadshows for its listing outside of the Gulf due to lack of interest from foreign institutional investors.

Some investors who attended the Aramco roadshow in Abu Dhabi on Monday also expressed mixed feelings about investing in the deal.

Aramco’s future weight in the region’s benchmark indexes was a compelling reason for fund managers in the Middle East and North Africa to invest in its shares, a fund manager said after the roadshow.

But another fund manager said Aramco’s dividend yield of 4.4 percent at the top end of its valuation was less attractive than many other publicly-traded oil companies.

For example, oil supermajor Royal Dutch Shell has a dividend yield of 6.48 percent, Refinitiv data shows.