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Aramco's valuation expected not to exceed $2 trln

Aramco's valuation expected not to exceed $2 trln
The Saudi oil firm targets to sell up to 0.5% of its shares to individual investors

By: Bedour Al Raee

Riyadh – Mubasher: Saudi Arabian Oil Co, globally known as Saudi Aramco, is expected to be valued between $1-2 billion as it is set to be listed on the Saudi Stock Exchange (Tadawul). 

The institutional book-building period will begin on 17 November and end on 4 December, while retail investor book-building period will run from 17 November to 28 November, according to the company’s prospectus released in the early morning hours of Sunday.

The Saudi oil firm targets to sell up to 0.5% of its shares to individual investors, the 658-page prospectus showed, but it didn’t disclose the size of the sale or the pricing range.

Expected valuations

It what is expected to be the world’s biggest initial public offering (IPO), the state-run oil giant is forecast to be valued between $5-10 a share (equivalent to SAR 37.5 to SAR 18.75). 

According to a survey conducted by Mubasher, Saudi Aramco may be valued at SAR 37.5 ($10) a share, which corresponds to a $2 trillion market value.

A second expectation suggests a market value of $1.75 trillion, or SAR 32.81 ($8.75) per share.

In addition, the state-owned oil firm may be valued at $1.5 trillion, $1.25 trillion, or $1 trillion, corresponding to SAR 28.13 ($7.5) a share, SAR 23.44 ($6.25) a share, and SAR 18.75 ($5) a share, respectively.

Mohamed El-Sabban, an oil expert, expected that the market valuation of the Aramco will not exceed SAR 37.5 a share.

The price range for Aramco’s IPO will be announced on 17 November.

For his part, Khaled Feda, expected that the size of the offering will be between 2% and 3%, with the allocation of 25% of the offering to individual investors and 75% to qualified institutional investors.

Feda also forecast that the valuation of the oil giant will range between $1.5 trillion and $1.8 trillion, at SAR 28 to SAR 33 per share.

Inactive inflows

The long-awaited IPO is expected to attract SAR 40 billion in inactive inflows, boosting Tadawul to make up around 3% of MSCI Emerging Markets Index, Feda noted.

Capital expenditures

According to Aramco’s prospectus, the company’s capital expenditures, excluding expenditures for mergers and acquisitions, are expected to be between $40 billion and $45 billion by 2021.