Saudi Aramco shares surged after its initial public offering (IPO), valuing the oil producer at a record US$1.88 trillion and lifting Saudi Arabia’s stock market into the ranks of the world’s largest.
The stock jumped the daily 10% limit to 35.20 riyals when trading began in Riyadh as Aramco board members, Saudi officials and invited guests cheered at a ceremony in the kingdom’s capital.
Aramco raised US$25.6bil in the biggest-ever IPO, selling shares at 32 riyals each and valuing the company at US$1.7 trillion, overtaking Microsoft Corp and Apple Inc as the most valuable listed company.
The start of trading in Riyadh marks the end of a near four-year saga that’s been intertwined with Crown Prince Mohammed bin Salman’s rise to global prominence and his Vision 2030 plan to reform the Saudi economy. First announced in an interview with Economist in January 2016, the IPO fell short of the US$100bil international offering with a valuation of US$2 trillion that the prince once proposed.
Saudi officials pulled out all the stops to ensure that the stock traded higher after an offering that international investors largely rejected, citing the valuation and concerns including governance issues and possible security threats.
The stock price also should be underpinned by demand from index-tracking funds, since Aramco will be added to emerging-market benchmarks.
“Aramco should easily get to the US$2 trillion valuation 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 big that it easily dwarfs the rest of the companies in the Saudi market, which have a combined value of about US$500bil. Adding in Aramco, the kingdom’s bourse becomes the world’s ninth-biggest stock market, overtaking India and closing in on Germany and Canada. Saudi Arabia, though, only sold 1.5% of the company’s capital, meaning that barely any of its shares will trade.
— (Bloomberg)
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