Aramco’s weight on TASI, global indices depends on free float shares: Tadawul CEO

The Saudi Stock Exchange’s (Tadawul) new fast entry methodology does not require a review, as companies are only required to meet the rule conditions, as is the case with Saudi Aramco, Khalid Al-Hussan, Tadawul’s CEO, told Argaam in an exclusive.

“TASI will not be impacted by Aramco stock’s gains or losses in the first five days of trading. Tadawul will depend on the fifth day’s closing price to include the stock in the Saudi benchmark,” Al-Hussan said, adding the new mechanism ensures a balanced price ahead of impacting the index.

Global index providers will depend on the same methodology. FTSE Russel said the addition of the giant oil producer will be implemented after the close of business on the fifth day of trading.

On the other hand, MSCI said if Saudi Aramco starts trading before Dec. 12, it would add it to the MSCI Equity Indexes from Dec. 16.

The official date of adding Saudi Aramco to TASI and other global indices will be disclosed following the debut date (Dec. 11), Al-Hussan added.

Meanwhile, Aramco’s weight on TASI and global indices will depend on the size of free float shares to the total offered shares, and the methodology of index providers. This will define the expected inflows on the first day of Aramco’s inclusion in the index.

“It’s difficult to determine this today. However, if the total offer size, or 1.5% of the company’s capital, represents free float shares, Aramco’s weight on TASI will stand at 9.5%,” Al-Hussan said.

Elsewhere, the top official ruled out any possibility that the stabilizing manager intervenes in case of the stock rise. The stock price will be based on offer and demand. “The stabilizing manager fulfills the offers that weigh on the stock in the first days of trading. The stabilizing manager acts as the buyer, not seller of the stock,” he noted.

Shares of Saudi Aramco will start trading on Tadawul as of Wednesday, Dec. 11 with a daily fluctuation limit of 10%, Argaam reported.

Read: Saudi Aramco to debut on Tadawul on Dec. 11

The selling shareholder granted the stabilizing manager an option, pursuant to which the manager may purchase 450 million additional shares, equal to up to 15% of the total number of shares sold in the offering at the final price.

The over-allotment option will be exercisable in whole or in part upon notice by the stabilizing manager at any time during the period commencing on the date of the trading of the shares on Tadawul and ending 30 calendar days thereafter.

In case the purchase option was exercised in whole, the total offering size will be 3.45 billion shares worth SAR 110.4 billion.

For more details about Saudi Aramco IPO