The largest public exchange float in five years should generate some hyperbole, but the lead manager of the Saudi Aramco float, Samba Capital, reached a new level of praise for its client this month.
Samba deputy chairman Rania Nashar said the retail and institutional demand a fortnight into the bookbuilding process, which closed on 4 December, was proof the IPO had been a winning idea from Saudi crown prince Mohammad bin Salman. “This success corroborates the foresight and depth of the strategic decision behind this landmark moment not just in the company’s history, but also in the development of the Kingdom [of Saudi Arabia’s] economy,” she said.
The Aramco IPO’s final iteration is smaller than that originally proposed by the prince in 2016 – around $25bn (£19bn) raised instead of $100bn, from listing 1.5 per cent instead of 5 per cent of the state-owned company. This will equal Alibaba’s capital-raise in 2014.
The valuation won’t hit the magic$2 trillion mark either, with a top-end estimate of $1.7 trillion from a price of around $8 per share.
While the listing on the Saudi Tadawul exchange means UK investors will not be directly exposed to Aramco, it is momentous that the producer of 10 per cent of the world’s annual crude oil output is opening itself up in this way.
Jefferies analyst Jason Gammel said strong interest from institutions could have hit equities in London and elsewhere, but this was unlikely. “We expect that the yield and growth characteristics were not attractive enough at the proposed pricing range for global and developed market investors, who have plenty of yield options without the governance complications,” he said. “We thus expect very limited selling pressure on the stocks in our coverage universe as a source of funds to participate in the offer.” Mr Gammel said Aramco would be a feature in emerging market indices, however, alongside Petrobras (Br:PETR4) from Brazil and Lukoil (LKOH) in Russia.