Saudi Aramco raises $25.6 billion in largest-ever IPO

Daniel Fowler
December 6, 2019

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

Saudi Aramco's IPO is the largest in history, but fell significantly short of the $2 trillion valuation originally promised by Crown Prince Mohammed bin Salman.

The massive stock exchange debut would fund Crown Prince Mohammed bin Salman's Vision 2030 plan to wean the kingdom off oil and develop other sectors of its economy, while signaling to multinational companies and foreign investors that Saudi Arabia was open for business.

Sources told news agency AFP that Saudi Aramco will begin trading three billion shares on the country's Tadawul stock exchange on December 12 at a starting price of 32 riyals or $8.53. Some five million retail investors have applied for shares, while the institutional tranche attracted applications amounting to 397 billion riyals.

Aramco plans to sell 1.5 per cent of its shares in a deal that could raise up to $25.6 billion.

Climate change concerns, political risk and a lack of corporate transparency put foreign investors off the offering, forcing the kingdom to ditch ambitions to raise as much as $US100 billion via an global and domestic listing of a 5 per cent stake.

Saudi banks offered citizens cheap credit to bid for shares.

Even at a $1.7-trillion valuation, worldwide institutions baulked, prompting Aramco to scrap roadshows in NY and London and focus instead on marketing a 1.5% stake to Saudi investors and wealthy Gulf Arab allies.

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"Nevertheless, 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".

There are also concerns about dipping profitability as Aramco has acknowledged that climate change concerns could reduce demand for hydrocarbons and see global oil demand peak within the next 20 years.

The pricing of the shares is at the top range of what Aramco had sought.

Aramco has previously said 0.5 per cent of the offering will be allocated to retail investors, leaving 1 per cent - or 2 billion shares - for institutional buyers.

An Aramco representative declined to comment.

Saudi Aramco's debut would mark the first time in a decade that the world's largest publicly traded company is outside the U.S. In 2009, Exxon Mobil Corp. lost the title to PetroChina Co.

The IPO may also impact the regional markets by encouraging a greater number of companies to list across the Gulf Cooperation Council (GCC) after a quiet third quarter, PwC said in early November. It's been derailed by problems at home, including the backlash against his purge of the elite, and overseas by the outrage over the murder of Washington Post columnist Jamal Khashoggi and the war in Yemen.

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