Saudi Aramco IPO To Occur Exclusively On Local Stock Exchange

It looks like the initial public offering (IPO) of oil giant Saudi Aramco will be a local affair after the company cancelled its international road show and announced that the stock listing will occur only in Saudi Arabia.

The IPO will now rely on local investors after most international money managers balked at even the reduced-price target. The deal won’t be marketed in the U.S., Canada or Japan. Planned roadshow events in London and other European cities have been canceled.

Aramco will sell just 1.5% of its shares on the local stock exchange, about half the amount that had been considered, and seek a valuation of between $1.6 trillion U.S. and $1.71 trillion U.S.. As well as slimming down the deal, the Saudi authorities relaxed lending limits to ensure local demand to get the share sale done.

While the new valuation means that Saudi Aramco will overtake Apple Inc. as the world’s biggest public company, the plans are a long way from Prince Mohammed’s initial aims: a local and international listing to raise as much as $100 billion for the kingdom’s sovereign wealth fund. At the lower end of the price range, the offer would fall short of a record, coming in just below the $25 billion raised by Alibaba Group Holding Ltd. in 2014.

Saudi Arabia has been pulling out all the stops to ensure the IPO is a success. It cut the tax rate for Aramco three times, promised the world’s largest dividend and offered bonus shares for retail investors who keep hold of the stock.

No matter what the final valuation, the share sale will create a public company of unmatched profitability. Aramco earned a net income of $111 billion U.S. in 2018 on revenue of $315 billion U.S..