Saudi Aramco seeks $1.71 trillion valuation in world’s biggest IPO

Saudi Arabia put a preliminary valuation on its state-owned oil giant Aramco of between $1.6 trillion and $1.71 trillion, missing Crown Prince Mohammed bin Salman’s initial $2 trillion target.

In an updated prospectus published on Sunday, Saudi Aramco said it is seeking to raise as much as $25.6bn by selling a 1.5 per cent stake, in what could be the world’s biggest initial public offering.

* Price range: SAR30 – SAR32 per share

* Pricing at lower end of range would raise $24bn

* Aramco will publish the final price and thus valuation on Dec. 5

Saudi Arabia has been pulling out all the stops to ensure the IPO — key to the crown prince’s plans to diversify the economy — is a success. It’s cut the tax rate for the oil giant and is promising a hefty dividend. The kingdom has also negotiated commitments from its wealthiest families to invest in the offering.

Proceeds from the sale will be transferred to the sovereign wealth fund, which has been making a number of a bold investments, plowing $45bn into SoftBank Corp.’s Vision Fund, taking a $3.5bn stake in Uber Technologies and planning a $500bn futuristic city.

Still, valuation has been a sticking point ever since the Crown Prince first floated the idea in 2016. Aramco has faced a delicate balance by pushing the valuation as close as possible to $2 trillion — a figure that’s been met with skepticism from many investors — while making sure it’s attractive to potential Saudi buyers.

Among 16 banks that offered a valuation, the range in estimates ran from $1.1 trillion at the bottom right up to $2.5 trillion, a number that even the Crown Prince might find optimistic. The midpoint was $1.75 trillion, according to people who’ve reviewed all the research.

Ultimately, investors will decide. Bookbuilding for the offering starts on Sunday and retail investors will have to bid at the top end of that range. The company will set the final price for all investors based on institutional investors’ book-building process that ends on Dec. 5.

The roadshow for the offering will formally kickoff on Sunday morning with Aramco officials meeting potential investors at the King Abdullah Petroleum Studies and Research Center in northern Riyadh, according to a person with knowledge of the meeting.

Key details:

* Institutional book-building period: Nov. 17-Dec. 4

* Retail subscription period: Nov. 17-Nov. 28

* Targeted percentage of shares allocated to individual investors will be up to 0.5 per cent of shares

* Refund of excess subscription amount to individual investors: Dec. 12

* Aramco earned net income of $68.2bn in the first nine months compared with $83.1bn a year ago. Revenue slipped to $217bn from $233bn.