Saudi Aramco Sets IPO Record
The world's largest oil producer, Saudi Aramco, set the share price for the company's much-anticipated IPO yesterday at 32 riyals (about US$8.50), which will raise about $25.6 billion in new capital. That would put the value of Saudi Aramco at around US$1.7 trillion and make it the largest IPO ever.
The pricing of Saudi Aramco's IPO beats out the previous record holder, Alibaba Group, by a good margin. Alibaba raised just under $22 billion from its initial public offering in 2014.
After the offering is completed, Saudi Aramco will be the largest public company in the world by market cap. Apple (NASDAQ: AAPL), currently the world's biggest public company, has a market valuation of about $1.2 trillion as we speak.
The Saudi Aramco IPO has garnered a lot of media attention since Crown Prince Mohammed bin Salman first announced plans for the offering two years ago. Despite the eye-popping $1.7 trillion figure, Prince Mohammed was hoping for more. He previously talked about a $2 trillion valuation for the company.
Nevertheless, the company's IPO price is at the very top of likely expectations. The company previously said it was looking to IPO between 30 and 32 riyals. It got that.
Saudi Aramco said yesterday the IPO saw high demand. In the first two weeks of Aramco’s book-building period, it received orders for 5.9 billion shares.
Aramco is selling a 0.5% stake specifically to private Saudi investors and 1% to institutional investors, equivalent to 2 billion shares. The company said most of the demand for its IPO yesterday was coming from Saudi wealth funds and regional financial services operators.
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The IPO is part of a larger economic overhaul in Saudi Arabia that seeks new revenue streams aside from oil and gas. Prince Mohammed said the IPO was a way for the country to raise revenue for its sovereign wealth fund, which is (ostensibly) used to develop new cities and projects across Saudi Arabia.
Saudi Aramco is floating a 1.5% stake (3 billion shares) in the company itself. Trading is expected to begin on the Saudi Tadawul stock exchange in mid-December.
There are no immediate plans for another listing outside of Saudi Arabia right now. But I think we can expect a U.S. listing in 2020.
Would you buy Saudi Aramco stock? Let me know by tweeting me @lukemburgess.
Until next time,
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
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