- After its IPO, Saudi Aramco shares surged, hitting the record market value of $1.88 trillion and raising Saudi Arabia’s stock market.
- Aramco raised $25.6 billion in the largest IPO ever, selling shares at 32 riyals each, reaching the market value of $1.7 trillion, overtaking market value of Microsoft Corp. and Apple Inc. as the most valuable company listed.
After its Initial Public offering (IPO), Saudi Aramco’s shares surged, valuing the oil producer at a record $1.88 trillion and raising Saudi Arabia’s stock market to the ranks of the largest in the world. As trading started at 10:30 a.m. the stock jumped the regular 10 percent cap to 35.20 riyals. At the Fairmont Hotel in Kingdom’s capital Riyadh, Saudi officials and guests cheered in Riyadh as members of the Aramco Board.
Aramco raised $25.6 billion in the largest IPO ever, selling shares at 32 riyals each, valuing the firm at $1.7 trillion, overtaking Microsoft Corp. and Apple Inc. as the most valuable company listed. The beginning of trade in Riyadh marks the end of a nearly four-year saga that is intertwined with the rise to global prominence of Crown Prince Mohammed bin Salman and his vision to transform the Saudi economy in Vision 2030. First revealed in a January 2016 interview with Economist, the IPO fell short of the $100 billion global offers that the prince once planned, valuing $2 trillion.
Saudi officials pulled out all the stops to make sure the stock traded higher after an offer that was largely rejected by international investors, citing the valuation and concerns including issues of governance and potential security threats. As Aramco will be added to emerging-market benchmarks, the stock price should also be supported by demand from index-tracking funds.
“Saudi Aramco should easily get to the $2 trillion market value as soon as tomorrow; there is plenty of appetite for it,” said Marie Salem, the head of institutions at Daman Securities in Dubai. “And more money should flow soon with the international index inclusions. The start couldn’t be better.”
Aramco is so large that it can comfortably overshadow the majority of the Saudi business firms that have a combined value of about $500 billion. Adding to Aramco, the Kingdom’s stock exchange becomes the ninth largest stock market in the world, overtaking India, and closing in on Germany and Canada. Furthermore, only 1.5 percent of the company’s equity was sold by Saudi Arabia, which means that hardly any of its shares would trade.
Final orders reached $119 billion, with authorities allowing borrowers to raise more than average loans to fund the transaction. “There are a lot of transparency issues in the disclosures and based on the expected listing valuation, this uncertainty or opacity doesn’t seem to be paid for,” said Adam Choppin, an investment officer at FIS Group in Philadelphia, who decided not to buy shares.
Aramco’s IPO was said to have relied on some of the Kingdom’s wealthiest families, who had members detained in a hotel during the so-called crackdown on corruption in 2017, as well as on money from neighboring allies such as the Sovereign Wealth Funds or the Sovereign Wealth Funds. Investors from the Gulf Cooperation Council are confident that the stock price has plenty of room to increase, boosted by incentives ranging from bonus shares to rapid inclusion in benchmarks for emerging markets.
“Our theory that Aramco’s pricing fell short of $2 trillion to leave Saudi and GCC shareholders on the sidelines, enabling them to profit from the listing of Saudi’s crown jewel,” said Zachary Cefaratti, Chief Executive Officer of Dalma Capital Management Ltd., who purchased IPO shares via three funds.
As the stock stabilizing director, Goldman Sachs Group Inc. has the right to exercise an option to sell another 450 million shares. It could be executed up to 30 calendar days after trading begins in whole or in part. Alibaba Group Holding Ltd., the previous biggest IPO, increased 38 percent in its trading debut in 2014.