Saudi Arabia appreciates oil giant Aramco well below its original target Saudi Arabia News

Saudi Aramco has set a price range for its IPO which suggests that the oil giant is worth between $ 1.6 trillion to $ 1.7 trillion, below the two trillion dollars targeted by the Saudi Arabian Crown Prince, but which still makes it the world's potential biggest introductory offer.

Aramco said on Sunday that it plans to sell 1.5 percent of the shares, or roughly three billion shares, at a suggested price range of 30 riyals ($ 8.00) to 32 riyals ($ 8.53) each – appreciating the IPO to a whopping 96 billion riyals ($ 25.60 billion) at the top end of the range.

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If priced at the top, the deal could only beat the record-breaking $ 25bn raised by Chinese e-commerce giant Alibaba in the stock market debut in New York in 201[ads1]4.

Aramco's float is the centerpiece of Crown Prince Mohammed bin Salman's plan to diversify the world's top crude exporter away from oil.

Aramco does not plan to market its domestic stock exchange abroad, three people familiar with the matter said, suggesting that international roadshows will not take place.

"This will put the burden on the agreement at local and regional banks," said one of the three people.

"This means that most of the investors will participate as qualified foreign investors in a Saudi transaction," said another of the people.

Aramco finally started its stock exchange listing on November 3 after a series of false starts. Crown Prince Mohammed, who had pitched the idea of ​​the IPO four years ago, is seeking to raise billions of dollars through the deal to invest in the non-oil industry and gain employment.

But the investment world is still trying to determine what the famous secret company is worth. Analysts from banks working on the Riyadh course had estimated a broad valuation range for Aramco of between $ 1.2 trillion to $ 2.3 trillion.

On the one hand, Aramco is the world's most profitable company with a planned dividend of $ 75 billion next year, more than five times larger than Apple's payout, which is already the largest of any S&P 500 companies.

On the other hand, there is a surge in oil prices at a time when global demand is expected to decline from 2025 as measures to cut greenhouse gas emissions are rolled out and the use of electric vehicles is increasing.

Risky game?

The deal is also rich with political risk, as the Saudi government – which relies on Aramco for most of its funding – will continue to control the company. Prince Mohammed's reputation was hurt by the killing of Saudi journalist Jamal Khashoggi last year.

In addition, Aramco's oil facilities were targeted on September 14 in attacks that originally halved production. The company has said that the strikes would not have a significant impact on the business.

Stock sales are expected to be a big hit among Saudi citizens who are offered 0.5 percent of the company.

Al Jazeera & # 39; s Economics Editor, Abid Ali, says that many of the country's billionaires, some of whom were arrested by Saudi authorities in Riyadh's Ritz Carlton hotel in a 2017 anti-corruption crackdown, are likely to be big investors when the shares sold.

"At that level, it will be a success, because on the day the shares are sold, the Saudi pension funds, the investment funds, will take out any of the stock that is left over, Ali said.

But," he, international investors stay away.

"There are different ways to value Saudi Aramco. There is the use of oil prices, free cash flow and dividends. And on most of these measures, the math just didn't stack up. And many international investors did not want to be a passenger in a car driven by Saudi authorities, "he added.

Retail investors have until November 28 to register for the IPO while institutional investors can subscribe to December 4 , with corporate management to market roadshows this week.

The Aramco listing marks a year-end for equity markets with Alibaba currently ordering a listing in Hong Kong that is expected to raise up to $ 13.4 billion for the online store. [19659002] The Riyadh listing comes after the initial hopes of a five per cent listing on the domestic and international stock exchanges were cleared last year amid the debate over the overvaluation and where Aramco is to be translated overseas.

Aramco said the IPO schedule was delayed because it started a process to acquire a 70 percent stake in petrochemicals manufacturer Saudi Basic Industries Corp.

SOURCE:
Al Jazeera and news agencies