Retail subscription for Saudi Aramco’s initial public offering (IPO) reached $7.21 billion on Tuesday, as the retail element of the sale attracted 3.1 million people with a total of over 8.4 million shares, announced SAMA Capital.
Meanwhile, people familiar with the matter announced that foreign individuals and institutions are willing to subscribe to Aramco’s IPO.
On Monday, the IPO registered 2.6 million subscribers who deposited $5.8 billion to buy 680.2 million shares, meaning nearly half a million new subscribers in one day pumped nearly $1.6 billion.
Vice-chairman of Samba Capital, Rania Nashar, believes the IPO huge turnout is an indication of the strong confidence in the company's financial position and the increased awareness among Saudi citizens.
This comes amid talk about the increased desire of foreigners to invest in the IPO, which is classified as the largest in the history of IPOs in global markets.
Abu Dhabi Investment Authority is planning to put as much as $1.5 billion into Aramco’s IPO, Bloomberg quoted people familiar with the matter, who asked not to be identified.
Aramco and the Authority’s spokesmen declined to comment on the reports, even though three sources confirmed the news to Bloomberg.
For his part, Saudi economist Ibrahim al-Omar affirmed that Aramco’s top position among energy-producing companies makes it a target for foreign investors, individuals, institutions, funds, and portfolios, including sovereign funds.
Omar believes there are four main reasons for the foreign willingness to invest in Aramco: the company has huge physical assets like pumps, sorting and power plants, industrial and residential cities, equipment, machinery, computers, and information technologies spread across the globe.
The second reason for foreigners, according to Omar, is that the company has a huge international presence in many countries, especially industrialized countries such as Japan, China, India, Singapore, South Korea, US, and Europe.
He added that Aramco has huge cash flows on a daily basis, making it hugely influential on the financial industry.
The fourth reason being the company’s high administrative and technical expertise, noting that based on all those reasons, the company is expected to be a global investment target on a large scale.
Omar believes three determinants have a negative impact and may have a positive impact if they are taken care of, such as the level of transparency, governance of the company, and the external control systems similar to the company's strong internal control systems.
Also, the management of industry risks is highly important, including the future of energy and chemical and oil-based industries as a primary input, and not an energy source.
The economist noted that the company has huge daily cash flow, which, in addition to allowing a wide segment of local and foreign individuals, institutions, companies, and funds to invest in the company, will prompt the introduction of innovative products, and a financial industry that can contribute to saving the global market from potential financial crises and disasters.
Omar added that this is possible especially when realizing that Aramco's cash flow is a commodity-related source, not just pure financial derivatives. This would also make the company distinct in the Islamic financial industry, thus pulling the rug from under the London market or other markets interested in this matter.