The historic debut at the stock market by the Saudi Arabian oil giant Saudi Aramco has seen the stocks of the company rise by 10 per cent at the start of their trading on Wednesday. The Aramco IPO was the largest ever in the world. However, the company did not manage to touch the $2 trillion valuation that it had been wanting to and as projected by the Saudi Crown Prince Mohammed bin Salman.
A record $25.6 billion by selling 1.5 per cent of the company was raised last week by the IPO of Saudi Arabia’s giant state-owned oil monopoly. The amount raised by the company from the IPO was more than the previous record set in 2014 by China’s Alibaba at the New York stock exchange.
Aramco was valued at $1.7 trillion from its IPO that was launched on Saudi Arabia’s Tadawul stock exchange in Riyadh which made it the most valuable publicly traded company in the world surpassing the $1.2 trillion valuation of Apple Inc.
Following its debut on Wednesday, shares in Saudi Aramco shot up to 35.20 riyals ($9.39) – which was the maximum daily increase allowed under the rules of the exchange. That rise in its share prices valued the company at $1.88 trillion.
Saudi Arabians accounted for a vast majority of buyers for the stock. 97% of retail investors who received shares were from the country, said Samba Capital, which managed the IPO. Saudi companies, funds and government institutions had purchased more than 75 per cent of shares sold to institutional investors.
Saudi Arabia wants to use the money generated from the IPO as investments to create alternative revenue generating sources for the country and to reduce dependency on oil.
In 2018, initial plan of the Saudi government was to float 5 per cent of the company for the public which it hoped would raise as much as $100 billion. At that time, the Saudi government, the owners of Aramco, had been eyeing launching the IPO in the international markets such as New York or London, as well as Riyadh. That was a signal that global investment was acceptable for the country.
However the government later scrapped the idea because of concerns over possible legal complications in the United States, the possibility of not achieving a $2 trillion valuation and the outrage in the international market against the kingdom following the murder of journalist Jamal Khashoggi in a Saudi consulate in Turkey.
And even though the deal was plans were revamped some time earlier this year, there was not much enthusiasm from the international investors. The investors were concerned about stability of global oil prices as well as geopolitical risks associated with the company.
And the decision of the oil cartel OPEC, Russia and other oil producing countries last week to extend the production cuts is likely to further lend support to the price of Aramco shares in the coming days.
(Adapted from CNN.com)