SAUDI ARABIA put a preliminary valuation on its state-owned oil giant Aramco of between US$1.6 trillion and US$1.71 trillion, missing Crown Prince Mohammed bin Salman’s initial $2 trillion target.

In an updated prospectus published yesterday, Saudi Aramco said it is seeking to raise as much as US$25.6 billion by selling a 1.5 percent stake, in what could be the world’s biggest initial public offering (IPO).

Saudi Arabia has been pulling out all the stops to ensure the IPO — key to the crown prince’s plans to diversify the economy — is a success.

Proceeds from the sale will be transferred to the sovereign wealth fund, which has been making a number of a bold investments, plowing US$45 billion into SoftBank Corp.’s Vision Fund, taking a US$3.5 billion stake in Uber Technologies Inc. and planning a US$500 billion futuristic city.

Still, valuation has been a sticking point ever since the crown prince first floated the idea in 2016. Aramco has faced a delicate balance by pushing the valuation as close as possible to US$2 trillion — a figure that’s been met with skepticism from many investors — while making sure it’s attractive to potential Saudi buyers.

Among 16 banks that offered a valuation, the range in estimates ran from US$1.1 trillion at the bottom right up to US$2.5 trillion, a number that even the crown prince might find optimistic. The midpoint was US$1.75 trillion, according to sources who’ve reviewed all the research.

Ultimately, investors will decide. Bookbuilding for the offering started yesterday and retail investors will have to bid at the top end of that range. The company will set the final price for all investors based on institutional investors’ book-building process that ends Dec. 5.

The roadshow for the offering kicked off yesterday morning with Aramco officials meeting potential investors at the King Abdullah Petroleum Studies and Research Center in northern Riyadh, according to a source with knowledge of the meeting.

Aramco earned net income of US$68.2 billion in the first nine months compared with US$83.1 billion a year ago. Revenue slipped to US$217 billion from US$233 billion.

Saudi Aramco does not plan to market its domestic IPO in the United States, two sources familiar with the matter said.

Aramco had said earlier this month that the offering of shares would rely on the 144A rule of the U.S. Securities Act, which allows a non-U.S. issuer to tap the U.S. market.

The sources said Aramco will no longer rely on that rule, meaning it will not market the shares in the United States.

(SD-Agencies)