DUBAI/RIYADH, Nov 5 (Reuters) - The Saudi government plans to sell 2% of state oil giant Aramco in a domestic listing on December 11, three sources familiar with the matter said, but restrictions on future share sales mean an global IPO is ruled out for at least a year.
JP Morgan reportedly didn't offer a valuation, but said Aramco needs crude oil prices of $64.20 a barrel to break even this year.
Saudi Aramco officially kicked off its IPO on Sunday, saying that that it plans to list its shares in Riyadh.
The Crown Prince "expressed happiness" that Saudi Arabia's Capital Market Authority approved the listing of Aramco, the official Saudi Press Agency said. This is US$0.5 trillion less than what was the main idea of IPO of Crown Prince Mohammed bin Salman four years ago. JPMorgan Chase & Co. and UBS Group AG both wrote reports on Aramco, but declined to give valuation estimates to their clients, an unusual decision for a bank working on an IPO. Until now, the world's biggest IPO has been that of Chinese ecommerce company Alibaba in 2014, which raised $25bn.
While Aramco did not specify the time frame or how much of the total company it would be selling, according to verified sources, the company could possibly offer 1-2 percent of its shares on the regional bourse, raising somewhere between $20 billion - $40 billion in the process. It is due, however, to release a detailed prospectus on November 9, according to Bloomberg.
Saudi Aramco is the world's largest and most profitable oil company in the world. Meanwhile, Saudi Aramco's chief technology officer is trying to run interference: "The pessimism around oil is misplaced", Ahmad Al Khowaiter asserted in a recent interview.
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Aramco or RBC didn't immediately respond to a request from comment.
In fact, the company's net income as of September this year was $68.2 billion, compared to $83.1 billion by this same point in 2018.
A person familiar with the offering, speaking on the condition of anonymity to discuss private conversations, said there were signs the prince was edging toward accepting a valuation around $1.8 trillion.
However, becoming more like an International Olympic Committee has its downsides: the company will inevitably be more focused on quarterly returns and short-term profits and have less ability to do the big, long-term, countercyclical strategic planning that it can do now. The IPO sales will go towards the kingdom's sovereign wealth fund, which will then invest it into various companies all over the world.
The world's largest crude oil producer said shares are being sold by the company's 100% shareholder - the Saudi government - through a number of banks.
Saudi Aramco's impending IPO might additionally have an effect on its deliberate investments in India.