Aramco raises $25.6bn in initial stock offering

The sum raised could surpasses the $25 billion raised by the Chinese online trading group Alibaba in 2014

n this file photo taken on Nov. 13, 2019, visitors stop at the Aramco exhibition section at the Misk Global Forum on innovation and technology held in Riyadh. — AFP

NEW YORK — Saudi Arabia's state oil company Aramco launched its initial stock offering on Thursday, pricing at the high end of the target range and raising $25.6 billion, two sources told AFP.

Aramco shares will sell on the Riyadh stock exchange at a starting prices of SR32, putting the value of the company at $1.7 trillion, the sources said, making it the biggest company ever.

That sum raised by the oil giant surpasses the $25 billion raised by the Chinese online trading group Alibaba in 2014 when it entered Wall Street.

At $8.53 per share, the company would raise $25.6 billion from the IPO, making it the world's largest IPO, topping Alibaba's 2014 listing.

At this level, Aramco would have a market valuation of $1.7 trillion, overtaking Apple Inc. as the most valuable listed firm. Aramco is to make a formal announcement later Thursday.

The energy giant had been offering 1.5 percent, or three billion, of the company’s shares on the Saudi Stock Exchange (Tadawul) at an indicative price range of SR30-32 ($8-$8.53). A third of those shares, 0.5 percent, were allocated to retail, or individual investors.

Aramco completed the retail portion of its IPO last Thursday. It was 1.48 times oversubscribed with SR47.4 billion ($12.64 billion) in orders.

According to the IPO prospectus, Saudi Arabian retail investors that hold their shares for a minimum of 180 days, or six months, will be eligible for a 10 percent discount through the allocation of additional bonus shares.

The Aramco IPO is a cornerstone of Saudi Arabia’s Vision 2030 plan, which aims to wean the Kingdom off its reliance on oil to diversify the economy. The proceeds from the listing will go towards these diversification initiatives and could be invested in sectors such as logistics, mining, or developing the manufacturing and industrial economy.

“We understand that the bulk of the funds raised will go to the government or the Public Investment Fund, potentially adding to the sovereign’s already strong fiscal net asset position of 72.7 percent of gross domestic product (GDP),” S&P said in a note on Saudi Aramco’s IPO.

“Productively deployed, we believe the assets could also help maintain growth potential through our three-year ratings horizon,” S&P added.

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.

“We anticipate the coming quarter to be significantly more active with the recent announcement of Saudi Aramco’s record breaking flotation on Tadawul, along with many other companies which have expressed their intention to list in 2019,” said Steve Drake, partner, Capital Markets, PwC Middle East.

The company, which plans to pay a base dividend of $75 billion in 2020, reported a profit of $111.1 billion in 2018 and $46.9 billion in the first half of 2019. — Agencies