Saudi Aramco Shares Jump 10% In Record IPO’s First Day Of Trading

Topline: Saudi Aramco has finally gone public with the world’s largest-ever IPO on Wednesday morning, with shares rising the daily limit of 10% on the first day of trading and giving the state oil giant a valuation of $1.88 trillion.

• The world’s largest initial public offering soared past expectations in its long-awaited debut on Wednesday morning: Saudi Aramco listed 1.5% of its shares on the local stock exchange and priced its IPO at $8.53 per share, raising a total of $25.6 billion.
• With the stock jumping 10%—to a price of $9.38 per share—after the historic IPO began trading, that gives Aramco a market value of almost $1.9 trillion, overtaking behemoths like Apple ($1.17 trillion) and Microsoft ($1.14 trillion) for the title of the world’s biggest company.
• The oil giant surpassed its earlier valuation of $1.7 trillion, and if interest in shares continue and the stock continues to rise, the company could reach a market value of more than $2 trillion.
• Aramco’s listing increases the market size of Saudi Arabia’s Tadawul exchange by 370%, making it the seventh-biggest stock market in the world as it overtakes Canada, Germany and India, according to Bloomberg.
• The company’s weighting in the local exchange will be capped at 15%, with the proceeds from the IPO amounting to more than raised in a decade of initial public offerings on the Saudi stock exchange, Bloomberg reported.
• Aramco mainly relied on domestic and regional investors after less-than-hoped-for interest from abroad, as many big foreign investors were skeptical of the company’s finances and massive valuation. 

Crucial quote: “We are happy on the results today. And you have seen the market responds to our results, the company will continue to be the leader globally when it comes to the energy sector and at the same time we are looking at sustained and growing dividends to our investors,” Aramco CEO Amin Nassar told CNBC. “At the same time we continue our growth strategy, increasing profitability across cycles.”

Key background: Aramco’s IPO listing was first announced by Crown Prince Mohammed bin Salman in 2016 as part of his Vision 2030 socioeconomic reform program—in part aimed at reducing the country’s dependence on oil. But the IPO was twice put on hold in as many years, amid concerns from international investors over valuation, financial disclosures and security risks. Aramco chairman Yasser al-Rumayyan had previously told CNBC that the IPO was a safe bet for investors, despite lasting concerns over the September 14 drone and missile attack on Aramco facilities, after which it took weeks for the Saudi government to restore oil production. Aramco’s listing ultimately fell short of the $2 trillion valuation that the Crown Prince had hoped for. After lackluster involvement from investors abroad, the IPO had to rely heavily on domestic and regional support, coming from Saudi Arabia’s wealthiest families as well as from the sovereign wealth funds of neighboring allies Kuwait and Abu Dhabi.

Big number: The sheer scale of Aramco’s valuation is massive: It is far bigger than the rest of the companies in the Saudi market, which have a combined value of around $500 billion, according to Bloomberg.