Saudi officials ‘unhappy’ with foreign demand for Aramco IPO

Domestic retail investors and international institutions split on paying up to €1.6tn

Saudi Aramco oil facility in Saudi Arabia. Photograph: Maxim Shemetov/File Photo/Reuters

Saudi Aramco oil facility in Saudi Arabia. Photograph: Maxim Shemetov/File Photo/Reuters

 

Saudi Arabian officials have told bankers they are unhappy with the level of foreign demand for Saudi Aramco, adding to pressure ahead of an investor roadshow due to start on Sunday.

Advisers informed officials this week about a gulf in demand between domestic investors and foreign institutions in the run-up to the much-delayed initial public offering, said two people familiar with the process.

“The issuer expressed high levels of dissatisfaction with what they were hearing,” said one of these people.

Financiers are increasingly confident of bumper domestic demand at a valuation of $1.8 trillion (€1.63 trillion) or higher, banking on a retail allocation above the 0.5 per cent earmarked in the prospectus. Local investors, some of whom have been pressured to invest, have been encouraged to bid at these higher levels.

In recent weeks institutional investors have told bankers that $1.2 trillion-$1.5 trillion is more realistic.

Saudi officials have made recent trips to China and Russia in an attempt to shore up demand from state-owned funds, which they believe would help close the gap. Saudi pension funds, as well as other sovereign funds, are also expected to buy into the offering.

A person close to the process said the company was hoping to sway investors during the roadshow.

Shares in Saudi Aramco could list on Riyadh’s Tadawul stock exchange as early as next month. – Copyright The Financial Times Limited 2019