The Saudi government is selling a stake of up 0.5% in Aramco to individual retail investors on 17 November, firing the starting gun on what is likely to be the world’s largest initial public offering (IPO).

Aramco will be restricted from issuing additional shares for a year after the IPO, its prospectus said on Saturday.

The sale is a cornerstone of Crown Prince Mohammed bin Salman’s policy to diversify the Saudi economy from oil by investing the proceeds of billions of dollars in non-energy industries. The aim is to create jobs for a fast-growing population and prepare the desert kingdom for a post-oil future.

The long-awaited IPO is expected to raise around $1.5 trillion, less than the $2 trillion sought by the prince who is the kingdom’s effective ruler and chief policy maker. A weak oil market and the vulnerability of Saudi Arabia to outside attacks may have limited the appeal of the offering.

Drone and missile attacks on oil processing facilities in Abqaiq and Khurais temporarily knocked out about 50% of Saudi oil production on 14 September. Fingers of blamed pointed to Iran.

The more than 600-page prospectus published on Saturday did not include details of how much Aramco would be floated in total.

Bankers say the world’s largest oil company is seeking to sell 1%-2% on the local Saudi stock market. If the government sells a 2% stake, the retail offering could account for 25% or $10 billion of the deal size at the top valuation of $2 trillion.

The risks for investors are the potential for terrorist attacks and for encountering antitrust legislation, as well as the right of the Saudi government to decide maximum crude production and direct Aramco to undertake projects outside its core business.

Aramco may also change its dividend policy without prior notice to its minority shareholders, the prospectus said. The Saudi government has promised tax cuts and generous dividends to ensure success of the partial privatisation.

Aramco is the most profitable commercial entity in the world, outshining the likes of Apple, Google and Amazon. It unveiled a $68 billion profit for the first nine months of the year and is slated to be the largest IPO to date eclipsing China's Alibaba listing in 2014 that raised more than $21.8 billion on the New York Stock Exchange.

Aramco plans to pay a dividend on $13.4 billion for the quarter ending 30 September and declare an interim dividend of a maximum $9.5 billion.

The energy behemoth is the world’s largest integrated oil and gas company, producing one in every eight barrels of crude oil globally. Aramco produced 13.6 million barrels per day of oil equivalent, including 10.3 million bpd of crude oil in 2018.

Finance

Aramco firing the starting gun on IPO