Wed | Feb 19, 2020

Saudi Aramco replaces Apple as world’s largest listed company

Published:Thursday | December 12, 2019 | 12:23 AM

Saudi Arabia’s oil company Aramco gained 10 per cent in its first moments on the stock market on Wednesday in a dramatic debut that held until closing and pushed its value up to US$1.88 trillion, surpassing Apple as the largest listed company in the world.

Trading on the Saudi Tadawul stock exchange came after a mammoth US$25.6 billion initial public offering that set the record as the biggest ever in history, overtaking the US$25 billion raised by China’s Alibaba in 2014.

Demand during the book-building period for Aramco’s IPO reached US$106 billion with most of that generated by Saudi investment.

Aramco, owned by the state, has sold a 1.5 per cent stake in the company, pricing its shares before trading at 32 Saudi riyals, or US$8.53.

At pre-trading auction earlier in the morning, bids for Aramco had already reached the 10 per cent limit on stock price fluctuation allowed by Tadawul. That pushed the price of Aramco shares in opening moments to 35.2 riyals, or US$9.39 a share, where it held until closing at 3 p.m.

Despite a stunning attack in September blamed on Iran that struck Aramco’s main crude oil processing facility, the company remains attractive to many local investors.

Aramco is worth more than the top five oil companies – Exxon Mobil, Total, Royal Dutch Shell, Chevron, and BP – combined. It also has one of the lowest costs of production, estimated at around US$4 a barrel.

Crown Prince Mohammed bin Salman plans to use the money raised from the sale of a sliver of the kingdom’s crown jewel to diversify the country’s economy and fund major national projects that create jobs for millions of young Saudis entering the workforce.

The sale raises capital for the Public Investment Fund overseen by Prince Mohammed, but it is only part of a much larger transformation programme, to move the economy away from reliance on oil exports for revenue.

What the 34-year-old prince had initially sought was a US$2 trillion valuation for Aramco and the sale of up to 5 per cent of the company – on an international stock exchange as well as the Saudi market – that could raise US$100 billion.

Rather than float internationally, Aramco sold locally a 1.5 per cent stake – 0.5 per cent to individual retail investors and 1 per cent to institutional investors.

The retail portion was limited to Saudi citizens, residents of Saudi Arabia, or nationals of Gulf Arab states. Institutional investors have largely been Saudi and Gulf-based funds rather than the wider net of international investors the crown prince’s economic diversification plan may need to succeed.

Potential buyers outside of Saudi Arabia thought the prince’s US$2 trillion valuation was too high.

AP