New Aramco IPO prospectus touts strengths amid investor questions – Axios
What’s next: The prospectus will begin a bidding period for investors on Nov. 17, and announcement of the final price is scheduled for Dec. 5.
- Trading is expected to begin in mid-December, per The New York Times.
- Individual investors will be allocated up to 0.5% of the shares, the prospectus states.
The intrigue: The 658-page document does not say what the offer price will be, how much of the company will be floated or list an estimated valuation.
- Bin Salman previously hoped for a valuation of $2 trillion, but bank and analyst estimates have been lower, often substantially so.
- Kingdom officials plan to list as much as 5% of the company in a two-tiered process, with the IPO on the domestic exchange first, followed by a listing on a larger, as-yet-unnamed international venue.
The big picture: The mammoth oil producer reported $111 billion in net income last year and holds massive reserves. It provides roughly 10% of the world’s crude oil supply.
- There are, nonetheless, questions about its appeal to investors. The company faces security risks laid bare in aerial attacks it suffered in September.
- In addition, the company is controlled by the Saudi government, which will remain its dominant shareholder.
- Weeks ago, Aramco pledged a $75 billion dividend from 2020 through 2024, and, in a move aimed at reassuring potential investors, said outside shareholders are “intended” to be prioritized if they fall below that amount.
The intrigue: The prospectus touts a suite of “competitive strengths,” such as “Unrivalled scale of crude oil and condensate production and conventional proved reserves” and low per-barrel production costs.
Overall, Aramco sees Saudi crude, condensate and natural gas liquid supplies growing through at least 2050.
- It also says growth for oil demand in Asia and other developing nations is expected to offset the effects of alternative energy and new technology like electric vehicles.
- The prospectus argues that global demand is slated to grow through roughly 2035 before leveling off, and “an expected increase in market share from lowest cost producers, including the Kingdom.”
- It says that in a scenario where a more rapid transition away from fossil fuels causes demand to peak in the late 2020s, the kingdom’s output would still rise through mid-century.
But, but, but: A section of risk disclosures acknowledges: “Climate change concerns and impacts could reduce global demand for hydrocarbons and hydrocarbon-based products and could cause the Company to incur costs or invest additional capital.”
- It also notes the company may be affected by “Political and social instability and unrest,” armed conflict and terrorism.