Today Saudi Aramco isn’t just shunning New York — and other international exchanges — as a listing venue, but has decided it won’t even market the IPO to American, Canadian, European or Japanese investors. Instead, Aramco plans to rely heavily on ultra-wealthy Saudis, many of whom have been pressed to invest, to get the deal done. Saudi banks are loosening lending regulations to allow locals to buy more shares.
“Saudi Arabia has been moving the IPO toward becoming more focused on regional investors for a while,” Ayham Kamel, Middle East practice head at consultant Eurasia Group. “Western demand was going to be lukewarm given the valuation and the geopolitical risk.”Most of the money is likely to be raised from domestic rather than foreign investors. This means that the proceeds won’t be a fresh inflow of foreign capital but an internal transfer from Saudi households and corporates to the government.
On Monday, Aramco’s banks told investors in London and other European cities that roadshow events planned for this week had been canceled. The new valuation implies Aramco, which has promised a dividend of at least $75 billion next year, will reward investors with a dividend yield of between 4.4% and 4.7%, below what other oil majors pay. Exxon Mobil Corp. pays a dividend yield of just under 5%, while Royal Dutch Shell Plc pays 6.4%.
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