x

Society

Saudi Arabia Formally Starts IPO of State-Run Oil Firm

November 4, 2019

DHAHRAN, Saudi Arabia — Saudi Arabia formally started its long-anticipated initial public offering of its state-run oil giant Saudi Aramco on Sunday, which will see a sliver of the firm offered on a local stock exchange in hopes of raising billions of dollars for the kingdom.

An announcement from the kingdom’s Capital Market Authority announcing its approval for the share sale served as a starting gun for an IPO promised by Crown Prince Mohammed bin Salman since 2016.

The firm’s shares will be traded on Riyadh’s Tadawul stock exchange, said Amin H. Nasser, the president and CEO of Aramco, in an online video. Plans call for the firm to put other shares on a foreign exchange in the future.

“This is transformational and historic moment for Saudi Aramco,” Nasser said. He also stressed Aramco’s “disciplined financial approach and prudent and flexible balance sheet.”

Prince Mohammed hopes for a very-optimistic $2 trillion valuation for Aramco, which produces 10 million barrels of crude oil a day and provides some 10% of global demand. That would raise the $100 billion he needs for his ambitious redevelopment plans for a Saudi Arabia hoping for new jobs, as unemployment stands at over 10%.

However, economic worries, the trade war between China and the U.S. and increased crude oil production by the U.S. has depressed energy prices. A Sept. 14 attack on the heart of Aramco already spooked some investors, with one ratings company already downgrading the oil giant.

The announcement by the Capital Market Authority offered no timeline for the IPO, nor did documents later released by Aramco.

“The Capital Market Authority board has issued its resolution approving the Saudi Arabian Oil Co. application for the registration and offering of part of its shares,” the authority said in its statement. “The company’s prospectus will be published prior to the start of the subscription period.”

The Saudi-owned satellite channel Al-Arabiya reported last week, citing anonymous sources, that pricing for the stock will begin Nov. 17. A final price for the stock will be set Dec. 4, with shares then beginning to be traded on the Tadawul on Dec. 11, the channel reported. The channel is believed to have close links to the kingdom’s Al Saud royal family.

Aramco in its IPO documentation said the percentage of the company offered and the share price “will be determined at the end of the book-building period.” It said Aramco had a net income of $111.1 billion in 2018 and proven liquid reserves of 226.8 billion barrels. It said its net income as of the end of the third quarter this year was $68 billion.

Shares will be offered to institutional investors, as well as individual Saudi and foreign investors.

The kingdom has in the past used the company as a piggy bank for development companies, back when it was still an American company. Since buying a 100% interest in the firm by 1980, the royal family as its sole “shareholder” largely hasn’t interfered in the company’s long-term business decisions as its revenue provides around 60% of all government revenue.

But recently, there have been decisions seemingly forced onto Aramco, including the nearly $70 billion purchase in March of the petrochemical firm Saudi Basic Industries Corp. just before SABIC announced a plunge in its quarterly profits.

In Aramco’s first-ever half-year results, it reported income of $46.8 billion. Yet analysts say a $2 trillion valuation — Apple and Microsoft separately for instance are $1 trillion — may be a stretch. By announcing the start of the IPO on Sunday, Prince Mohammed may have been convinced to take a lower valuation in order to get the IPO moving. The kingdom likely is pinning its hopes on tremendous local interest to push up the company’s valuation before potentially taking some of the stock abroad.

Analysts believe Aramco will list as much as 3% of the firm on the Tadawul, with another 2% put abroad.

Saudi Aramco has sought to assure investors, given the questions over its valuation and the potential hazards of future attacks or geopolitical risk. A presentation posted to Aramco’s website last month announced the intent to offer a $75 billion dividend for investors in 2020. That’s the payment per share that a corporation distributes to its stockholders as their return on the money they have invested in its stock.

It also pledged that some 2020 through 2024, any year with a dividend under $75 billion would see “non-government shareholders” prioritized to get paid.

But beyond the stocks, worries persist that Saudi Arabia could be hit by another attack like the one Sept. 14, which the U.S. blames on Iran. Iran denies it launched the cruise missiles and drones used in the attack. Yemen’s Houthi rebels claimed responsibility, but analysts say the weapons used wouldn’t have the range to reach their targets from Houthi-controlled areas of Yemen.

___

By JON GAMBRELL and MALAK HARB Associated Press

Gambrell reported from Dubai, United Arab Emirates.

RELATED

NICOSIA — Israel on Thursday dispatched two water-dropping aircraft to help battle a large wildfire that has scorched at least 10,000 acres (4,000 hectares) of forest in the foothills of the Pentadaktylos mountain range in the breakaway north of ethnically divided Cyprus.

Top Stories

General News

FALMOUTH, MA – The police in Falmouth have identified the victim in an accident involving a car plunging into the ocean on February 20, NBC10 Boston reported.

General News

NEW YORK – Meropi Kyriacou, the new Principal of The Cathedral School in Manhattan, was honored as The National Herald’s Educator of the Year.

General News

PHILADELPHIA – The Federation of Hellenic Societies of Philadelphia and Greater Delaware Valley announced that the Evzones, the Presidential Guard of Greece will be participating in the Philadelphia Greek Independence Day Parade on March 20.

Video

Brothers, Basketball Focus of Antetokounmpo Family’s “Rise”

Giannis Antetokounmpo didn't watch this year's NBA Finals.

Enter your email address to subscribe

Provide your email address to subscribe. For e.g. abc@xyz.com

You may unsubscribe at any time using the link in our newsletter.