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Saudi Aramco Stock Offering to Launch November 17

10 November 2019

Saudi Arabian state-owned oil company Aramco will sell up to 0.5% of its shares to individual retail investors in what could be the largest initial public offering (IPO) in history, it announced in a prospectus on Saturday.

But the 600-page prospectus did not say how much of the Saudi firm would be sold, nor the date of the listing.

However key details about the deal, including the offer price and amount of shares being offered, were not included in the prospectus.

Aramco's low-priced oil production and its enormous reserves have helped transform the kingdom into one of the world's top 20 economies, but the state's control of the company carries a number of risks for investors.

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The company stated its plans to pay out an annual dividend of at least $75 billion starting in 2020, but questions linger over how much Aramco is worth. In addition, the Saudi Arabia's stock exchange will draw more domestic and global investment. However, without knowing the valuation that Aramco is targeting from the IPO, it is hard for investors to accurately compare the dividend yield of the state-owned energy company with its publicly traded rivals such as Exxon Mobil Corp. among others.

Even though the size of the IPO has not yet been disclosed, it is expected to be the biggest ever, raising over $30 billion. The final offer price and the number of offer shares to be sold will be determined at the end of the book-building period on 5 December 2019.

It was revealed on Saturday that Saudi Aramco has one class of shares, and a share entitles its holder to one vote and each shareholder has the right to attend and vote at General Assemblies, according to the prospectus.

The valuation would be nearly twice that of Microsoft, now the world's most valuable listed company, and seven times that of Exxon Mobil, the biggest listed oil major by market capitalisation.

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The value of the company is valued between $2 trillion and $2.3 trillion, CNBC reported, compared with US oil companies' Exxon Mobil with a market cap of almost $300 billion and Chevron at $229 billion.

Analysts from banks working on the Riyadh listing have projected a wide valuation range between $1.2 trillion to $2.3 trillion.

Investors are also concerned about geopolitical risks weighing on the stock. Most concerning for investors was likely to be the relationship between Aramco and the government, led by the Crown Prince.

Crown Prince Mohammed bin Salman is seeking to sell the shares to raise billions of dollars to diversify the Saudi economy away from oil by investing in non-energy industries.

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Saudi Aramco Stock Offering to Launch November 17