Japanese Investors Likely To Snub Saudi Aramco's IPO

Saudi Aramco unveils plans to kick off blockbuster float next week

The value of the company is valued between $2 trillion and $2.3 trillion, CNBC reported, compared with US oil companies' Exxon Mobil with a market cap of almost $300 billion and Chevron at $229 billion.

Still, the highly-anticipated sale of even just a sliver of the company is expected to make this the world's biggest initial public offering.

Saudi Arabia will allow investors to start bidding for shares in Saudi Aramco from 17 November 2019 and the targeted percentage of offer shares allocable to individual investors will be up to 0.5 per cent of the shares.

China, the world's largest oil importer, is expected to commit as much as $10 billion through sovereign wealth funds and other state-owned enterprises.

Sources have said the company could sell 1%-2% on the Saudi stock market.

The Kingdom's government aims to show investors why it believes the Saudi Arabian Oil Co., known as Aramco, should be valued above its oil and gas peers.

A prospectus released from Saudi Aramco said selling shareholder will receive all of the proceeds of the offering and will reimburse Saudi Aramco for all fees, costs and expenses it incurs.

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The prospectus said that among the risks for investors were the potential for terrorist attacks and the potential for encountering antitrust legislation, as well as the right of the Saudi government to decide maximum crude output and direct Aramco to undertake projects outside its core business.

Aramco has been in talks with Gulf and Asian sovereign wealth funds and wealthy Saudi individuals to secure top investors of the IPO, but no cornerstone investor is yet to formally agree to a deal.

Initial hopes for a 5% IPO on domestic and global bourses were dashed a year ago when the process was halted amid debate over where to list Aramco overseas.

The Saudis are seeking as high a valuation for Aramco as possible, but they may have to concede that Crown Prince Mohammed bin Salman's target valuation of US$2 trillion is simply not achievable, as bankers have repeatedly said, and accept a valuation of US$1.6 trillion-US$1.8 trillion to ensure that the much-hyped much-delayed IPO will be a success.

At a valuation of $2 trillion, Aramco could potentially raise $40bn, topping the record-breaking $25bn raised by Chinese e-commerce giant Alibaba in 2014.

Aramco and its advisers will use this marketing period to determine the offering's price and issue size based on demand ahead of the company's planned listing on the local Tadawul stock exchange.

Weaker oil prices cut its first half net profit by 12 percent to $46.9 billion this year, but the figures still overshadowed Apple, the world's most profitable listed company, which made $31.5 billion.

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