Page 4 - MEOG Week 45

MEOG Commentary MEOG
Aramco publishes
IPO prospectus,
but still no price
Saudi Aramco this week published its IPO prospectus, giving greater detail about its financials as well as outlining a wide variety of risks, but the wait for a valuation continues.
saudi arabia
What:
Aramco will begin its first domestic IPO on November 17.
Why:
A minority shareholding of around 1-2% will take place on the local Tadawul stock exchange, closing on december
4, with the company’s valuation to be made public the next day.
What next:
Investor interest is expected to be strong considering the media coverage as well as the compelling case made by Aramco.
At long last, Saudi Aramco has published the prospectus for its upcoming initial public offer- ing (IPO) on the tadawul stock exchange in Riyadh.
Despite its length, over 600 pages, the docu- ment did not include details on the company’s valuation, though much like the bond prospec- tus launched in early 2019, it offered valuable insight into the company’s operations and the risks inherent with an investment in Aramco.
Perhaps unusually, Aramco admitted some vulnerability, listing no fewer than 17 risks relating to the company’s operations, including: supply & demand, political and economic issues in Asia, competition, reserves estimations and growth.
Also mentioned as having potential for dis- ruption were the government’s control over oil production and potential future terrorist attacks.
The company did give some specifics relat- ing to the IPO. The institutional book-building period will run from November 17 until Decem- ber 4, with the retail investor book-building period finishing a few days earlier, on Novem- ber 28.
It said that 0.5% of the company would be allocable to individual investors, adding that non-resident, non-Saudi nationals would be able to acquire shares via swap deals with peo- ple authorised by the Capital Market Authority (CMA), the Saudi central bank.
Private investors buying shares who hold them for a period of six months after trading begins will receive bonus shares up to a total of 100 shares.
The government of Saudi Arabia undertook to impose a temporary moratorium on the sale of additional shares to the public for a six- month period after trading begins. However, this ban does not apply to sale of equity stakes to state-owned sovereign wealth funds or strategic investors.
Aramco also committed not to engage in share dilutions during the first six months of trading. Interestingly, no local or international bank is underwriting the issuance.
For its part, the Saudi government has been reported to have “strongly encouraged” wealthy Saudi merchant families to participate in the IPO and has instructed local banks to offer lenient
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w w w . N E W S B A S E . c o m Week 45 13•November•2019