- Saudi Aramco raised $25.6 billion from the largest IPO in the world, completing a deal that became synonymous with the crown prince of the kingdom.
Saudi Aramco raised $25.6 billion from the biggest initial public offering (IPO) in the world, completing a deal that became synonymous with the divisive crown prince of the kingdom and his efforts to reshape the oil-rich nation.
The state-owned oil giant set its share final price at 32 riyals ($8.53), valuing $1.7 trillion for the world’s most profitable company. It got $119 billion in total bids.
For Crown Prince Mohammed Bin Salman, the sale may help restore legitimacy damaged by setbacks to his strategy to reform the economy and a global reputation tarnished by the assassination of columnist Jamal Khashoggi of the Washington Post and the Yemen War.
But the deal ended up somewhat different from what the prince had foreseen when, in 2016, he first floated the idea intending to raise as much as $100 billion. Aramco offered just 1.5% of its stock and opted for a local listing after global investors balked at their expectations of $2 trillion worth of the company.
Alternatively, Aramco relied heavily on neighboring Gulf Arab monarchies ‘ local investors and funds. About 5 million people applied for shares in the deal for individuals. Closed on Wednesday, the institutional tranche received bids totaling 397 billion riyals.
The wealthiest families of the country, some of whom had members arrested during a so-called bribery crackdown in 2017 at Riyadh’s Ritz-Carlton hotel, were known to have made significant donations. When Saudi Arabia decided to focus on selling the shares to local and regional buyers, global banks working on the deal were sidelined.
However, once it starts trading, Aramco will become the most successful publicly traded company in the world, overtaking Microsoft Corp. and Apple Inc. The transaction opens up to investors and Saudi individuals one of the world’s most hidden firms, whose revenues have helped bankroll the monarchy and its royal family for decades. Until this year, in international debt markets, Aramco had never released financial statements or lent.
It will also mean that for the first time since it was nationalized in the late 1970s, the firm now has investors other than the Saudi government.
Saudi Arabia had taken all the stops to make sure that the IPO was a success. It reduced Aramco’s tax rate three times, pledged the highest dividend in the world, and gave bonus shares to retail investors holding the stock.
Goldman Sachs Group Inc. has the right to exercise a so-called greenshoe option of 450 million shares as the stock stabilizing agent.
At any time on or before 30 calendar days after the trading launch, the purchase option can be exercised in whole or in part. It could raise $29.4 billion in proceeds from the IPO.
Sale proceeds will be passed to the Public Investment Fund, which has made many ambitious investments, plowing $45 billion into the Vision Fund of SoftBank Corp., taking a $3.5 billion interest in Uber Technologies Inc. and building a futuristic city of $500 billion.
The selling is the first big disposal of state assets since Prince Mohammed initiated a much-touched program in 2016 to reduce the addiction of the economy to oil revenue.
The last major government privatization, the 2014 IPO of National Commercial Bank, received $83 billion in subscriptions from investors.