Loding Loading ...
Trading in financial markets involves significant risk of loss which can exceed deposits and may not be suitable for all investors.
Before trading, please ensure that you fully understand the risks involved
Trading in financial markets involves significant risk of loss which can exceed deposits and may not be suitable for all investors. Before trading, please ensure that you fully understand the risks involved

Thursday, December 05, 2019

Gulf News - Robust regional demand drives Saudi Aramco IPO to a close

by Century Financial in Century in News

Gulf News - Robust regional demand drives Saudi...

Dubai: Saudi Aramco’s mega share sale wrapped up on Wednesday and was met with more than enough regional demand, setting itself up for shares to be priced at the top end of its marketed range.

The state-owned oil titan, which is selling 1.5 per cent of its trillion-dollar stock in a deal that could raise up to $25.6 billion, has attracted over $60 billion in orders.

With three billion shares in the company up for sale, two billion shares were allotted to institutional investors while the rest was for retail buyers. About six billion institutional shares and 1.5 billion retail shares were subscribed for, making it respectively nearly 3 times and 1.5 times the number of shares offered.

Institutional buyers — typically asset managers, insurers or pension funds — were allocated shares from November 17 until 1700 Saudi time on December 4. Over $50 billion in institutional orders came in, the advisers said, on top of retail bids worth $12.6 billion.

Analysts had earlier flagged that the initial public offering (IPO) would be oversubscribed, but not by a huge margin. The level of interest is relatively modest when compared to the listing of Saudi Arabia’s National Commercial Bank in 2014 when the retail portion was 23 times oversubscribed — although the uniquely-large Aramco listing will make it tougher to standardise the level of demand.

Discounted trade?

Shares were marketed at between 30-32 Saudi riyals, or $8-$8.5, valuing Saudi Aramco at between $1.6 trillion and $1.7 trillion.

“Given the strong demand the shares are likely to be priced at the top end of the range,” said Vijay Valecha, Chief Investment Officer at Century Financial. “Shares are likely to perform well in the first few days of trading given the strong fundamentals of the company like huge reserves and low cost of operations.”

However, Aramco would eventually trade at a discount to other oil majors, with a valuation of $1.3 trillion, a recent Bernstein survey of 31 asset managers in North America, Europe and Asia showed. If the shares trade at the high end of the range it means that investors would be over-paying by around 35 per cent, the poll further indicated.

“While investors agree that Aramco has superior financial and franchise strength, weak corporate governance and limited earnings growth are reasons for the discount relative to peers,” said analysts at Bernstein. “While this does not mean the IPO will be a failure, it does mean that share gains will be highly dependent on oil price.”

Saudi Arabia will push for an extension of oil production cuts through mid-2020 at a producers’ summit this week in an effort to prop up oil prices, and, in turn, Saudi Aramco’s IPO share price, several media reported earlier this week. Opec is gathering in Vienna.

The final price for Aramco’s IPO and a decision from the Organization of the Petroleum Exporting Countries (Opec) on oil prices are both expected to come in on Thursday.

Source - Gulf News

trade-talks
brainy-bull
mental-funda
wow
get-started