Saudi Aramco IPO: A brief overview

Saudi Arabian Oil Co., doing business as Saudi Aramco, operates as an oil exploration
company. It is the world’s largest oil producer, supplying more than 10% of global oil and
financing the Saudi state with its proceeds. Owned by the Kingdom, it has proved oil
reserves of more than 260 billion barrels (the world’s second-largest after Venezuela); it also
owns about 300 trillion cu. Ft. of natural gas reserves (the fourth largest in the world).
From exploration, production, and gas processing to refining, distribution, trading and
marketing, Saudi Aramco is present across the entire value chain. It sells refined products
like LPG, naphtha, gasoline, jet fuel, kerosene, diesel, fuel oil, asphalt and chemicals.

Why Aramco went for IPO?

The launch of Saudi Aramco IPO is considered to be a very aggressive move since due to
Shale gas, the future of oil prices are quite uncertain. The major motive behind it was the
ambitious Saudi Vision 2030 transformation plan.

 It was initially back in 2016 when the plan was launched and the Kingdom
desperately needed cash that to be spent on development projects, such as the
US$500 billion NEOM mega-city project.
 The Kingdom wanted to attract foreign investors and win political favours as the
revenue of the Government has dropped to half from 2012 to 2016.
 The government also wanted to increase its transparency as the number of official
reserves had not been updated since 1989.

Challenges faced while listing

Since the Launch plan in 2016, the IPO has been delayed significantly due to various
reasons.
In 2016 itself the prices of oil were very low. Then it was scheduled in 2018, but still, the
company had to work on a lot of formalities, specifically the amount of transparency and
the listing location. There was a huge competition for listing in Hong Kong, London, New
York, and Singapore.
And also there were issues like Terrorism ACT JASTA in NYSE, which delayed it further. Then
again in 2019 due after a September 14 attack on its Abqaiq and Khurais plants temporarily
knocking out half its crude output, it was delayed till December 11 on which it was finally
listed.
After years of delay Saudi Aramco much anticipated IPO launched
Saudi Aramco has announced the final pricing and size of the firm's highly anticipated IPO,
which closed modestly oversubscribed in early December. The government put up 3bn
Aramco shares-equivalent to 1.5% of total equity-for long-awaited sale on November 17th,
engaging in a book-building process with a price range per share set at SR30-32 (US$8-8.5).
Orders from institutional investors totalled SR395bn along with SR47.4bn from retail made
the entire offering about 475% oversubscribed. The response was an evident
disappointment for a hugely hyped deal. Many foreign investors continued to view the
shares as over-priced, and international roadshows for the Tadawul offering were cancelled
in light of weak appetite, with marketing largely confined to the Gulf.

Aramco listed in world’s biggest IPO on December 11,2019

 Listed at Riyadh-based stock exchange

 Issue Price: 32 riyal ($8.53)
 Valuation: $1.7trillion
 Debuts at 35.2 riyal ( 10% Premium above issue price )

In a press conference at OPEC’s Vienna HQ Prince Abdulaziz scolded the international press
for their coverage of the IPO and said the company would trade at more than $2 trillion in a
few months. “Those who have not subscribed in Aramco will be chewing their thumb to the
point that I will be worried about them that they go and fix themselves in the hospital,” the
oil minister said.
Nonetheless, by raising US$25.6bn, the IPO became the largest in history, mitigating the
damage to the crown prince's reputation. The share "stabilising manager"-a role held by
Goldman Sachs-has the right to purchase up to 450m additional shares for 30 days after the
start of trading in order to satisfy excess demand from institutional buyers, potentially
raising the deal's size to US$29.4bn.
- Aayush Goyal | Manas Bindal | Suwansh Srivastava