Saudi Aramco plans to offer only 0.5% of its shares to individual investors

The share sale of the world’s most profitable company certainly has investors keen. But with a wide range of expected IPO share price, investors are also wary to make any commitments without knowing more.

The range suggested has been between $1.2 trillion and $2.3 trillion. Historically, the Crown Prince of Saudi Arabia has long since insisted the valuation to be $2 trillion.

Saudi Aramco has now released its IPO prospectus, according to which it will be offering only up to 0.5% of its shares to individual investors. However, it did not reveal the size of its offering or number of shares.

Previously there were reports that the oil giant would offer 1% to 2% of its shares. It is not yet clear whether Saudi Aramco will be selling more than 0.5% of its shares to institutional investors.

The IPO process is said to begin on 17th November and end on the 4th of December. The final share price, percentage and number of shares will be revealed after this period. However, according to the prospectus, 28th of November is the cut off date for individual investors to request for shares.

The prospectus names Citigroup Saudi Arabia, Credit Suisse Securities (Europe) Limited, Goldman Sachs International, HSBC Saudi Arabia, and J.P. Morgan Securities plc, amongst many others as underwriters of the IPO.

In what is expected to be the world’s largest public offering, Saudi Aramco has sweetened the deal by saying it will pay dividends of $75 billion starting in 2020. However, we cannot gauge the value of these dividends without the final valuation of the oil giant.

The IPO share sale is available to two types of investors: institutional subscribers and individual investors. With restrictions on eligibility, the share sale is not open to all. There are a number of eligibility criteria for each tranche for purchase of IPO shares that are detailed in the prospectus.

The IPO is expected to be listed on Tadawul in December, which is the local Saudi Stock Exchange. CNBC reported that they could be looking at a dual listing on an international exchange “going forward”.

The Financial Times reported that the government will not be listing new shares in the six months following the IPO, under a statutory lock-in period. Moreover, it will “enter a contractual lock-up period of 12 months, during which time it will not be able to sell any more shares except to foreign governments and overseas state-related strategic investors.” This could mean that the Russia-China fund looking to partake in the shares could wait until the price is revealed before applying for Aramco shares.