Riyadh/dubai (Reuters) – Saudi Aramco (2222.SE) shares surged the maximum permitted 10% above their IPO price on their Riyadh stock market debut on Wednesday, in a move hailed by the government, now towering $1.9 trillion.
The shares closed at 35.2 riyals ($9.39) each, up from the initial public offering (IPO) price of 32 riyals and at the daily limit of price moves allowed by the Tadawul exchange.
That gives Saudi Arabian Oil Co (Aramco) a market value of about $1.88 trillion, comfortably making it the world’s most valuable listed company and closing in on the $2 trillion price tag long coveted by Saudi Crown Prince Mohammed bin Salman.
“It’s a great day for Saudi Arabia and the leadership of Saudi Arabia and for the people of Saudi Arabia. It’s a D-Day for Aramco, it’s a day of reckoning and vindication,” Energy Minister Prince Abdulaziz bin Salman told Reuters in Madrid.
Aramco raised a record $25.6 billion in its IPO last week, the culmination of a years-long effort by the Crown Prince to open up the energy giant to outside investors and raise funds to help diversify the economy away from oil.
Aramco’s IPO process, however, has been a struggle since the Crown Prince announced in 2016 his plan to raise as much as $100 billion via an international and domestic listing of a 5% stake. Listing plans were halted in 2018 and when the deal was revived this summer, it found little interest beyond the Gulf. Riyadh scaled back its ambitions and canceled roadshows in New York and London, selling just a 1.5% stake and relying on mainly domestic and regional buyers.
Just 23% of the institutional tranche was sold to non-Saudi investors. Sources have said the Abu Dhabi Investment Authority (ADIA) and Kuwait Investment Authority (KIA), sovereign wealth funds of two of Saudi Arabia’s Gulf allies, planned to invest.
International banks lured by expectations of lucrative fees were also sidelined after failing to bring in foreign investors, banking sources said.
Prince Abdulaziz said last week that Aramco was worth well over its IPO valuation of $1.7 trillion and predicted investors who didn’t buy into the offering would be “chewing their thumbs” after missing out.
The flotation propels the Riyadh bourse into the world’s top 10 by value of listed companies.
Aramco’s share price surge values it at more than six times U.S. oil major Exxon Mobil Corp (XOM); more than twice Saudi Arabia’s annual gross domestic product; and far ahead of U.S. tech giant Apple’s (AAPL.O) $1.2 trillion price tag.
“We are hopeful that Saudi Aramco uses the Tadawul listing as a springboard to an eventual international listing,” said Bassel Khatoun, managing director, frontier and MENA at Franklin Templeton Emerging Markets Equity.
But investing in Aramco is a bet on the price of oil, and growth in global demand for crude is expected to slow from 2025 as global steps to cut greenhouse gas emissions are rolled out and the use of electric vehicles increases.
Featured Image courtesy Walls Street Journal.