Aramco’s IPO could entice Saudi individuals back to local bourse

Middle East has turned the tables on global M&A
A man walks past palm trees lining the corniche promenade in Dhahran, Saudi Arabia, on Thursday, Oct. 4, 2018. Saudi Arabia's Crown Prince Mohammed said the central elements of his Vision 2030 plan, including the $100 billion Saudi Aramco sale and the effort to boost non-oil revenue, remain on course. Photographer: Simon Dawson/Bloomberg

(Bloomberg) –Saudi Aramco’s gigantic initial public offering could trigger a return by retail investors to the Riyadh stock exchange as individuals snap up shares in the world’s most profitable company.

The oil behemoth said over the weekend in its offering prospectus that as much as 0.5% of the stock will be allocated to individual investors, while leaving potential buyers in the dark about the size of the stake it plans to sell and the pricing range.

Read: Aramco’s record IPO starts November 17; size of offering pending

Were the company to fetch a valuation of $1.5 trillion — lower than the range aimed for by Saudi Arabia, but closer to estimates by foreign investors — the portion set aside for individuals could be $7.5 billion. Some locals have been selling part of their equity portfolios recently to raise cash for Aramco stock, according to analysts and investors.

Locals were consistent net sellers even before the IPO was confirmed, stepping up their disposals amid rising geopolitical concerns, such as the September drone attacks on Aramco’s oil facilities. Foreigners, on the other hand, have been steady buyers, followed by local institutional funds. This stemmed mostly from the kingdom’s promotion to major emerging-market equity benchmarks, which triggered passive buying by global funds.

–With assistance from Paul Wallace.