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Last Updated : Dec 06, 2019 05:56 PM IST | Source: Moneycontrol.com

Saudi Aramco clocks $1.7 trillion market valuation after blockbuster IPO

Aramco priced its IPO at 32 riyals ($8.53) per share, the top of its indicative range, the company said in a statement, raising $25.6 billion and beating Alibaba's record $25 billion listing in 2014.

Saudi Aramco is now the world's most valuable company with a market valuation of $1.7 trillion after its initial public offering (IPO) raised $25.6 billion. The company has comfortably overtaken Apple.

Aramco priced its IPO at 32 riyals ($8.53) per share, the top of its indicative range, raising $25.6 billion and beating Alibaba's record $25 billion-listing in 2014.

The company may further increase the size of the deal to a maximum of $29.4 billion by exercising a 15 percent "greenshoe" option, Reuters quoted sources say.

Close

The listing is expected later this month on the Riyadh stock exchange, but it still falls short of the towering $2 trillion valuations long sought by Crown Prince Mohammed bin Salman.

The initial plan was to sell a 5 percent stake to raise as much as $100 billion via international and domestic listings.

However, even at a $1.7 trillion valuation, climate change concerns, political risk and a lack of corporate transparency put international institutions off the offering. Saudi Arabia thus sold 1.5 percent stake to domestic and regional investors and offered citizens cheap credit to bid for shares.

The pricing comes as the Organisation of the Petroleum Exporting Countries (OPEC) is gearing up to deepen oil supply cuts to support prices, provided it can strike a deal later this week with allies such as Russia.

Riyadh has gone quiet on when or where Aramco could list abroad.

DIVERSIFY FROM OIL

The IPO is the culmination of a years-long effort to sell a portion of the world's most profitable company and raise funds to help diversify the kingdom away from oil and create jobs for a growing population.

However, despite the official push and offer of loans to fund share purchases, interest was relatively muted compared with other emerging market IPOs. For comparison, Alibaba's listing in Hong Kong this month had bids for 40 times the number of shares on offer.

"The amount raised by the IPO itself is relatively contained given the size of the economy and medium-term funding requirement of the transformation plan. But combined with other areas of funding we believe that there is meaningful capital in place to progress with the investment plans aimed at diversifying the economy," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

Saudi citizens were offered 0.5 percent of the company or about a third of the offering, an unprecedented retail offering compared with previous Saudi IPOs. Aramco has planned a dividend of $75 billion for 2020, more than five times larger than Apple's payout, which is already among the biggest of any S&P 500 company.

The other factor that could have played on investors' mind is that investing in Aramco is also a bet on the price of oil. However, global demand for crude is expected to slow from 2025 as climate objectives are rolled out and the use of electric vehicles increases.

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 in the deal. ADIA declined to comment, while KIA did not respond to requests for comment.

(With inputs from Reuters)

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First Published on Dec 6, 2019 07:52 am
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