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, in Riyadh, Saudi Arabia, Wednesday, Dec.
RIYADH, Saudi Arabia —
Saudi Arabia's oil company Aramco gained 10% in its
first moments on the stock market Wednesday 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
Aramco, owned by the state, has sold a 1.5% 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% 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.
FILE - In this
Friday, Sept. 20, 2019 file photo, workers seen
in Aramco's oil separator at processing facility
in Abqaiq, near Dammam in the Kingdom's Eastern
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% of its shares to individual retail investors — most
of whom are Saudi nationals — and 1% 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
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% of the company - on an international stock exchange
as well as the Saudi market - that could raise $100
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%, was raised from non-Saudi
investors, according to lead adviser Samba Capital.
Saudi companies and government institutions raised 51%
of the overall demand, with public and private funds
contributing to the remaining 26%, 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 on Wednesday saw a
countdown in Arabic, the sounding of a bell, a light
show with music and applause all around. At the
celebration at the Fairmont hotel in Riyadh, Aramco
Chairman Yasir Al-Rumayyan, described the sale as “a
proud and historic moment for Saudi Aramco and our
majority shareholder, the kingdom.” He said it
demonstrates further significant progress toward Saudi
Arabia’s transformation and economic growth.
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.
Strong demand for Aramco's stock has so far been mostly
generated by Saudi funds, rather than the wider net of
international investors the crown prince's economic
diversification plan may need to succeed.
The sale of Aramco is a step toward raising new streams
of capital for the government's Public Investment Fund,
but it is only part of a much larger transformation
needed to move the economy away from reliance on oil
exports for revenue.
Zachary Cefaratti, chief executive officer of Dalma
Capital which invested in Aramco through funds, said he
anticipates the company could as early as Thursday
become the first in the world valued at over $2 trillion
if another day of 10% gains are met.
To encourage Saudi citizens to buy and keep hold of
Aramco stock, the company says it will pay a dividend of
at least $75 billion in 2020. Individual Saudi investors
who hold their shares for six months from the first day
of trading can also receive up to 100 bonus shares, or
one for every 10 held.
The government additionally encouraged Saudis by making
it easier to access credit for stock purchases.
The result was that just over 5 million individuals,
nearly all of them Saudi nationals out of a population
of around 20 million citizens, generated subscriptions
of $13 billion.
With oil prices hovering around $63 a barrel, the
kingdom needs a breakeven oil price of $87 a barrel to
balance its budget and climb out of deficit, according
to Monica Malik, chief economist at Abu Dhabi Commercial
One of the biggest expenditures is government salaries
for the millions of Saudis that work in the public
Aramco's flotation could helps generate billions of
dollars in capital to invest in job-creating projects
that benefit private businesses and keep unemployment
from rising beyond current levels of roughly 12%.