Basil M.K. Al-Ghalayini

On April 25, 2016, Crown Prince Mohammed bin Salman announced that the Kingdom would sell less than 5 percent of oil giant Saudi Aramco’s shares via a partial IPO: “If 1 percent of Aramco is offered to the market, just 1 percent, it will be the biggest IPO on earth.”

So, what makes Aramco, the world’s most profitable company, an attractive investment opportunity?
In 2018, Aramco made $111 billion while Apple, the second-most profitable company, made $59.5 billion. Moreover, Aramco reported a net income of $46.9 billion, EBIT of $92.5 billion, and free cash flow of $38 billion in the first half of 2019.

Based on the company’s prospectus — announced on Nov. 9 — Aramco is committed to delivering sustainable and growing dividends to its shareholders through crude oil price cycles. Subject to Aramco’s board’s discretion after consideration of a number of factors, the board intends to declare aggregate ordinary cash dividends of at least $75 billion with respect to the calendar year 2020. That means each stockholder will receive $0.375. Additionally, as it aims to encourage national investors, Aramco announced that each Saudi investor who continuously holds shares for 180 days from the first date that shares begin trading, will be entitled to receive one bonus share for every 10 allocated shares up to a maximum of 100.

Aramco’s price range for its IPO will be determined today, while the final share price will be determined on Dec. 5. The targeted percentage of offer shares allocable to individual investors will be up to 0.5 percent of the shares. The company has SR60 billion in capital, divided into 200 billion shares without nominal value.

The hype and anticipation for this IPO brings back memories of mega IPOs in the Saudi capital market history such as Al-Rajhi Bank, SABIC, STC and others. Since floating, these companies have created wealth to national subscribers. The only difference here is that Aramco is offered from day one to both local and global investors.

Local and global banks involved in this IPO include NCB, SAMBA, Morgan Stanley, Goldman Sachs, Citigroup, HSBC, Bank of America Merrill Lynch, JPMorgan and Credit Suisse, among others. With their mighty global networks, Aramco will rely on them to invite institutional global subscribers.
Today, history is in the making. The countdown has started in Saudi Arabia’s crown jewel, the largest IPO in history. 

Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.