KHALEEJ TIMES, Tuesday, Dec 3, 2019 | Rabi Al Thani 6, 1441
Saudi Aramco proving its worth as IPO's institutional tranche more than twice oversubscribed
Institutional investors have put in SR144.1 billion ($38.4 billion) worth
of bids for Saudi Aramco's planned initial public offering (IPO), equivalent to
more than twice the number of shares on sale, financial advisers for the IPO
said on Monday.
The bookbuilding process for allocating shares to institutional buyers -
typically asset managers, insurers or pension funds - began on November 17 and
investors have until December 4 to place orders.
Aramco plans to sell 1.5 per cent of its shares in a deal that could raise up to
The state-owned Saudi oil giant has received subscription orders for around 4.6
billion of shares so far from institutions, Samba Capital, NCB Capital and HSBC
Saudi Arabia said
Aramco has previously said 0.5 per cent of the offering will be allocated to
retail investors, leaving 1 per cent - or two billion shares - for institutional
The lead managers didn't provide a breakdown of the institutional investors, but
in a separate statement last week Samba Capital said the bulk of orders came
from Saudi companies and funds, while foreign investors accounted for just 10.5
per cent of the offers as of November 28. The retail tranche, which closed on
that date, attracted bids worth SR47.4 billion, equivalent to around 1.5 times
the number of shares offered.
Meanwhile, Saudi Arabia's Tadawul has introduced an equity index cap of 15 per
cent which is set to address concerns over the weighting Aramco will have when
it lists on the exchange.The Aramco IPO is seen as a test for the Saudi
exchange, where the largest listing so far has been worth $6 billion.
"Any constituent whose index weight reaches or exceeds the threshold will be
capped in accordance with the set limit," Tadawul said in a statement on Monday.
Aramco is expected to have an initial weight of close to 10 per cent in the
Tadawul all-share index. "This is a precautionary measure to assure investors
regarding Aramco's impact on the Saudi index in case of any further liquidation
in the future or in case the stock price goes up," said Mazen Al Sudairi, head
of research at Al Rajhi Capital.
The cap would limit the risk of any security representing a large percentage of
the index and becoming a major risk for the market, as well as limiting the
index's correlation to the oil price, he added.
The move is part of a broader update of Tadawul's index methodology, including a
revision of the free float shares calculation methodology. The new measures will
"ensure more balanced indices, which will accurately represent the movement of
the market, enhance disclosures and transparency and minimise securities'
dominance," Tadawul CEO Khalid Al Hussan said in a statement.