Saudi Aramco shares rose after its initial public offering, as the market value of the world’s largest oil producer was valued at a record $1.88 trillion, which in turn raised the stock market in Saudi Arabia to the ranks of the largest companies in the world.
Daily shares rose 10% to 35.20 riyals when trading began at 10:30 am, as members of the Aramco board of directors and Saudi officials were invited to a ceremony held at the Fairmont Hotel in Riyadh, the capital of the Kingdom of Saudi Arabia.
Aramco had raised $26.6 billion in the largest ever IPO, selling its shares at 32 riyals per share and at a company market value of $1.7 trillion, overtaking Microsoft Corp and Apple and becoming the most valuable company on global stock exchanges.
Saudi officials have withdrawn from all stations to ensure that the shares traded were higher after international investors largely rejected them, citing valuation and concerns including governance issues and potential security threats. The share price should also be based on demand from index tracking funds, as Aramco will be added to emerging market standards.
” Aramco should easily get to the $2 trillion valuation as soon as tomorrow; there is plenty of appetite for it,” said Marie Salem, head of institutions at Daman Securities in Dubai. “And more money should flow soon with the international index inclusions. The start couldn’t be better.”
Aramco is so big that the rest of the companies in the Saudi market look like dwarves in front of them, which have a combined value of about $500 billion. In addition, due to Aramco, the Kingdom has become the ninth largest stock market in the world, bypassing India and approaching Germany and Canada. Despite this, Saudi Arabia sold only 1.5 percent of the company’s capital.
Final orders exceeded $119 billion, as authorities allowed lenders to increase loans beyond normal to support the sale.
“There are a lot of transparency issues in the disclosures and based on the expected evaluation of the list, it does not seem that one of them is getting paid for this ambiguity or obfuscation,” said Adam Chopin, an investment officer at the FIS Group in Philadelphia, who decided not to buy the shares. It is reported that domestic investors appear to have been very involved, while there is no such influence for foreign investors.
Aramco’s IPO was said to have depended on some of the kingdom’s richest families who were holding members of a hotel during what was called a crackdown on corruption in 2017, as well as from neighboring allies such as sovereign wealth funds in Kuwait and Abu Dhabi. Gulf Cooperation Council investors are confident that the share price contains many areas that can be increased, which are supported by incentives that go from additional shares to the rapid inclusion in emerging market standards.
The boom that appeared in early trading confirms “our thesis that Aramco’s pricing fell short of $2 trillion to leave upside on the table for Saudi and GCC investors, allowing them to benefit from the listing of Saudi’s crown jewel,” said Zachary Cefaratti, chief executive officer at Dalma Capital Management Ltd.
Goldman Sachs Group Inc., as a stock stabilization manager, has the right to exercise the option of selling another 450 million shares. It can be fully or partially executed up to 30 calendar days after the start of trading. Previous subscriptions such as Ali Baba Holding Limited rose 38% in their debut in 2014.
The proceeds from Aramco’s IPO will be transferred to the Public Investment Fund, which has made a number of bold investments including the SoftBank Group Corp.’s Vision Fund and a $3.5 billion stake in Uber Technologies. The Saudi authorities indicated that “a lot” of money would be spent in the local economy this week.
The returns of the Aramco deal alone are equivalent to more than a decade of public offerings in the Saudi Stock Exchange Tadawul index. The deal also opens one of the most secretive companies in the world, which funds Saudi Arabia and its rulers for decades, but until this year never published financial statements or reports of borrowings in international debt markets.
Aramco has promised to pay abundant profits amounting to a minimum of $75 billion annually until 2024.