Saudi Aramco Reveals Key Risks Before Giant IPO

(Bloomberg) -- Saudi Aramco published the prospectus for what could be the biggest initial public offering in history. The oil giant disclosed a catalog of risks, ranging from terrorism to government interference, the impact of climate change on demand and even currency exchange difficulties.

Risk factors

• Political unrest and acts of terrorism such as the Sept. 14 attacks on the Abqaiq processing facility and the Khurais oil field may “materially and adversely affect” Aramco and the market price of the shares
• The U.S. Justice Against Sponsors of Terrorism Act, known as Jasta, may create a
  new basis for American nationals to sue Aramco, similarly to the claim “recently filed against Motiva”
• The Saudi government determines the kingdom’s maximum level of crude oil production and the country’s public finances are highly connected to the hydrocarbon industry
• Any sovereign decision that the kingdom makes as a member of OPEC “is communicated by the government to the company and can have a direct impact on the company”
• Climate change concerns and impacts could reduce global demand for hydrocarbons and hydrocarbon-based products; increasing attention on climate change risks may result in an increased possibility of litigation against Aramco and its affiliated companies
• Aramco agrees to cover $100 million a year in studies and other consulting work for the ministry of energy
• The inability of foreign investors to exchange Saudi riyals for other currencies could have a material adverse effect on demand for, and the trading price of the shares
• Aramco pays dividends to its shareholder, the Saudi government, in U.S. dollars; if the Saudi riyal is no longer pegged to the U.S. dollar and the value of the riyal were to change, the company may be required to expend additional cash to fund any dividends; such changes could have “a material adverse effect” on Aramco’s financial position

Shares Offering

• Institutional book-building period: Nov. 17-Dec. 4
• Retail investor book-building period: Nov. 17-Nov. 28
• Aramco didn’t publish size of the stake it plans to sell and the pricing range
• Shares allocable to individual investors will be up to 0.5% of the shares
• Non-Saudi nationals who are not resident in the kingdom and institutions incorporated outside the country will be permitted to acquire an economic interest in the shares by entering into a swap agreement with an authorized person by the Capital Market Authority

Pricing

• Aramco to announce final offer price Dec. 5
• Following the book-building period, Saudi Aramco will publish the final offer price, the number of shares to be sold

Listing

• The Saudi government will not sell additional shares during the 12-month period following the initial date of the public listing
• Aramco prohibited from listing additional shares for a period of six months after the commencement of trading

Aramco officials

• Prospectus shows board members unchanged
• Pay of top five directors, including the chief executive officer and the chief financial officer, including allowances, bonuses and other benefits in cash or kind: 80.8 million riyals ($21.5 million)
• Aramco set up a share plan for employees

To contact the reporters on this story: Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net;Matthew Martin in Dubai at mmartin128@bloomberg.net

To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Bruce Stanley

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