Aramco Considering Discounted Shares for Saudis

Saudi Arabian Oil Co., gearing up for what may be the world’s biggest initial public offering, is considering discounted shares for local investors, according to people with knowledge of the matter.

The oil company has discussed ways to structure the offering in different tiers, allowing Saudi buyers to receive the stock at a lower price than international investors, the people said, asking not to be identified as the talks are private, Bloomberg reported.

Shares in companies owned by the Saudi government have traditionally been offered to locals at a nominal value of about 10 riyals ($2.67) each -- far below their true worth. The stock market regulator last year approved new rules to price initial public offerings based on demand.

“The government has in the past used the IPO process as way to share wealth with its nationals,” John Sfakianakis, director of economic research at the (Persian) Gulf Research Center, said Wednesday. “It’s a way of giving back to citizens some of the state’s wealth, especially as some recent measures have impacted incomes.”

Aramco, as the company is known, is considering listing venues in the US, UK and Asia, in addition to Riyadh, and is planning to choose local banks to advise on the Saudi listing, the people said.

No final decisions have been made on the share pricing or listing venue, the people said.

Saudi Arabia plans to sell shares in the company as part of plans by Deputy Crown Prince Mohammed bin Salman to set up the world’s biggest sovereign wealth fund and reduce the economy’s reliance on hydrocarbons. The sale could value Aramco at more than $2 trillion, Bin Salman said in an interview with Bloomberg.

The value of IPOs on the Saudi Stock Exchange has slumped in the past two years as the fall in the oil price and government austerity measures weighed on investor sentiment.

International and local banks have been pitching to advise Aramco on the planned share offering, with the company expected to appoint additional banks to work on the IPO over the next few weeks, the people said.