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Wed. 9:17 a.m.: Saudi Aramco gains 10 percent in debut to clinch top seat at $1.8T

Saudi Arabia's state-owned oil company Saudi Armco and stock market officials celebrate during the official ceremony marking the debut of Aramco's initial public offering (IPO) on the Riyadh's stock market today in Riyadh, Saudi Arabia. (AP Photo/Amr Nabil)

RIYADH, Saudi Arabia (AP) — Saudi Arabia’s oil company Aramco gained 10 percent in its first moments on the stock market today in a dramatic debut that held until closing and pushed its value up to $1.88 trillion, surpassing Apple as the largest listed company in the world.

Trading on the Saudi Tadawul stock exchange came after a mammoth $25.6 billion initial public offering that set the record as the biggest ever in history, overtaking the $25 billion raised by China’s Alibaba in 2014.

Demand during the bookbuilding period for Aramco’s IPO reached $106 billion with most of that generated by Saudi investment.

Aramco, owned by the state, has sold a 1.5 percent stake in the company, pricing its shares before trading at 32 Saudi riyals, or what is $8.53.

At pre-trading auction earlier in the morning, bids for Aramco had already reached the 10 percent limit on stock price fluctuation allowed by Tadawul. That pushed the price of Aramco shares in opening moments to 35.2 riyals, or $9.39 a share, where it held until closing at 3 p.m.

A stunning attack in September blamed on Iran struck Aramco’s main processing facility. Still, the company remains attractive to many local investors. Aramco is worth more that the top five oil companies — Exxon Mobil, Total, Royal Dutch Shell, Chevron and BP — combined. It also has one of the lowest costs of production, estimated at around $4 a barrel.

Internationally, however, investors have been spooked by the geopolitical risks associated with Aramco, as well as the Saudi crown prince’s policies and the stain on the kingdom’s reputation following the killing of Saudi writer Jamal Khashoggi by Saudi agents in Turkey last year.

Rather than float internationally, Aramco sold locally 0.5 percent of its shares to individual retail investors — most of whom are Saudi nationals — and 1 percent to institutional investors, most of which are Saudi and Gulf-based funds.

The retail portion was limited to Saudi citizens, residents of Saudi Arabia or nationals of Gulf Arab states.

Crown Prince Mohammed bin Salman plans to use the money raised from the sale of a sliver of the kingdom’s crown jewel to diversify the country’s economy and fund major national projects that create jobs for millions of young Saudis entering the workforce.

What the 34-year-old prince had initially sought was a $2 trillion valuation for Aramco and the sale of up to 5 percent of the company — on an international stock exchange as well as the Saudi market — that could raise $100 billion.

Instead, potential buyers outside Saudi Arabia thought his $2 trillion valuation was too high. With the gains made on Tadawul and a strong local push, the company moves closer to clinching that $2 trillion mark without even listing internationally.

Less than a quarter of institutional investment generated in the IPO, or 23 percent, was raised from non-Saudi investors, according to lead adviser Samba Capital.

Saudi companies and government institutions raised 51 percent of the overall demand, with public and private funds contributing to the remaining 26 percent, Samba Capital said.

“They have had to launch the IPO on their own stock exchange as the valuation was unlikely to be achieved elsewhere,” said John Colley, associate dean at Warwick Business School in the U.K.

He said the surging price on launch suggests that buying may be from those affiliated to the crown prince.

In the lead up to the flotation, there had been a strong push for Saudis, including princes and businessmen, to contribute to what’s seen locally as a moment of national pride, and even duty.

A brief ceremony as trading started today saw a countdown in Arabic, the sounding of a bell, a light show with music and applause all around.

Aramco, which has exclusive rights to produce and sell the kingdom’s energy reserves, was founded in 1933 with America’s Standard Oil Co. before becoming fully owned by Saudi Arabia four decades ago.

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