Saudi Aramco shares to begin trading after world's biggest IPO

Anuj Chopra - Agence France-Presse
Saudi Aramco shares to begin trading after world's biggest IPO
In this file photo taken on November 13, 2019, visitors stop at the Aramco exhibition section at the Misk Global Forum on innovation and technology held in Riyadh. Aramco launched its initial stock offering on December 5, 2019, pricing at the high end of the target range and raising $25.6 billion, two sources told AFP.
AFP / Fayez Nureldine

RIYADH, Saudi Arabia—Saudi Aramco's shares begin trading on the domestic stock market Tadawul on Wednesday, after the energy behemoth completed the world's biggest initial public offering.

Saudi-owned broadcaster Al-Arabiya said the price of Aramco shares had risen by the maximum 10 percent in pre-trading orders, further raising the firm's valuation.

Aramco has priced the IPO at 32 riyals ($8.53) per share, raising $25.6 billion by selling three billion shares and eclipsing Alibaba's $25 billion IPO of 2014 to become the world's largest.

Aramco said in a statement to the Saudi Stock Exchange on Wednesday that it has sold 450 million more shares, boosting the value of the offering to $29.44 billion.

This means that Aramco has in effect sold 1.725 percent of its shares instead of the initial 1.5 percent.

The sale of Aramco shares is the bedrock of de facto ruler Crown Prince Mohammed bin Salman's ambitious strategy to overhaul the oil-reliant economy. 

Riyadh’s Tadawul stock exchange said it will hold an opening auction for Aramco shares for an hour from 9:30 (0630 GMT) followed by continuous trading, with price changes limited to plus or minus 10 percent. 

The IPO process put the energy giant's value at $1.7 trillion, far ahead of other firms in the trillion-dollar club, including Apple and Microsoft. 

But the scaled-down listing is still a far cry from the blockbuster originally planned by Prince Mohammed.

The much-delayed stock sale, first announced in 2016, was initially expected to raise as much as $100 billion from the sale of up to five percent of the company.

The government's plans to raise additional funds by listing on a major international market are also on hold.

The IPO fell short of Prince Mohammed’s desired $2 trillion valuation.

But the government is trying to persuade wealthy families and institutions to buy Aramco shares after trading begins on the stock market in a last-ditch effort to reach the $2 trillion mark, the Financial Times reported on Tuesday.

The Saudi government itself has pumped in huge funds to boost the IPO, which was originally intended to raise external funding for the kingdom's diversification plan.

Two-thirds of the shares were offered to institutional investors. Saudi government bodies accounted for 13.2 percent of the institutional tranche, investing around $2.3 billion, according to lead IPO manager Samba Capital. 

The IPO is a crucial part of Prince Mohammed's plan to wean the economy away from oil by pumping funds into megaprojects and non-energy industries such as tourism and entertainment.

But sceptics say the proceeds will barely cover the kingdom's budget deficit for a year.

The IPO was heavily focused on Saudi and other Gulf traders. International investors have remained sceptical about the secretive company's targeted valuation.

The IPO also comes with oil prices under pressure due to a sluggish global economy hit by the US-China trade war and record output by non-OPEC crude exporters.

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