Aramco released its prospectus on Saturday, setting out some of the details of what could be the world’s largest IPO. The prospectus stated that individual investors will be able to buy up to 0.5% of the shares and will have until 28th November to apply for an allocation. The company plans to pay an annual aggregate cash dividend of ‘at least’ USD75bn starting next year. Any special dividends would be on top of this. As the deal is in the book building stage and no firm details have been mentioned investors can’t yet gauge the dividend yield.
One interesting assessment in the 658-page document was the company forecast for global oil demand and its belief that demand will peak anywhere between the late 2020s and mid-2030s. The company quoted a forecast from industry consultant IHS Markit that peak oil would be in 2035. However, the second scenario in the prospectus assumes that there will be a faster transition away from fossil fuels leading to peak oil in the late 2020s.
One thing that was missing from the documentation on Saturday was any mention of valuation. It was widely reported that the Saudi Government believe Aramco should be valued at approximately USD2tn, however, the range from others as to the value is anywhere from USD1.1tn to USD2.5tn. The whisper on the street seems to be around the USD1.5tn level. The deal is being underwritten by Wall Street big hitters, namely Goldman Sachs, Morgan Stanley, Citigroup and J.P. Morgan. However, with vastly differing ideas in such things as valuation, market appetite etc, plus security worries, we’re guessing there will be more than just a few bankers having sleepless nights hoping they don’t catch a cold on the deal. Yes, the fees will be big, but for them, so are the risks.