Saudi Aramco will have the largest IPO in history – maybe.
At the top end of the range, Aramco’s offering will be larger than Alibaba’s mega listing, details released Sunday showed. The state-owned behemoth is offering a 1.5% stake (less than was generally expected) at a price range of 30-32 riyals per share. It will be the biggest public company by a country mile. The final price and valuation will be published on December 5.
If the offering prices at the low end of the range, it will come up short of Alibaba’s record from 2014. All told, the valuation range for Aramco is between $1.6 and $1.7 trillion, well short of the lofty $2 trillion Crown Prince Mohammed Bin Salman famously insisted the company is worth.
The IPO – a cornerstone of Prince Mohammed’s “Vision 2030” plan – has been fraught, to say the least. His efforts to woo the world have been complicated by a laundry list of concerns over the past two years, including corporate governance issues, the valuation, the October 2018 extrajudicial killing of journalist Jamal Khashoggi (which served as a macabre reminder to the world that pretensions to a “progressive” agenda aside, the crown prince is still an unelected autocrat capable of ruthless crackdowns on dissent) and, of course, the attacks on Abqaiq and Khurais.
And then there are concerns about climate change and the backlash against fossil fuels (ironic because “Vision 2030” aims at weaning the kingdom off oil revenue), as well as investor jitters about the vulnerability of Aramco’s infrastructure in a volatile region (heightened by the September attacks).
Earlier this month, Aramco announced a series of changes to the royalty regime and a marked reduction in the tax rate applicable to the company’s downstream business in an effort to attract investors. Additionally, Aramco will pay some $75 billion in dividends in 2020, on top of any special payouts. Saudi retail investors in the IPO will be awarded one free share (a “bonus share”) for every 10 allotted shares they “continuously and uninterruptedly” hold.
Read more: In Landmark, Saudi Arabia Officially Announces IPO For Aramco, World’s Most Profitable Company
Still, Riyadh is being forced to lean heavily on rich locals, many of whom Prince Mohammed already tapped for some $100 billion during his farcical “corruption crackdown” in November of 2017.
Aramco said Sunday it won’t offer shares in the US, Canada, Japan or Australia. The prospectus from November 9 noted the company may make offers and sales to qualified institutional investors in the US under Rule 144A.
The company said this weekend it has considerable “head room” to raise the dividend. Aramco will sell “at least” 14 million b/d of crude and fuels by 2030, CFO Khalid Al-Dabbagh remarked, during a presentation Sunday. Aramco’s “rules of thumb” for calculating cash flow entail a $1.5 billion change for every $1/bbl change in oil prices.
At the end of the day, the kingdom’s crown jewel has no peers in terms of profitability. In 2018, Aramco had more net income than Apple, Google and Exxon combined. 
Comparatively speaking, Exxon and Shell are a joke.
