Aramco on top of the IPO world
Oil giant prices IPO at top end to be valued at $1.7T, comfortably overtaking Apple
State-owned oil giant Saudi Aramco's initial public offering will be the biggest in history as the company priced its IPO at SR32 ($8.53) per share, the top of its indicative range, according to three sources familiar with the decision.
This will raise $25.6 billion, beating Alibaba's record $25 billion listing in 2014. At that level, Aramco has a market valuation of $1.7 trillion, comfortably overtaking Apple as the world's most valuable listed firm. The listing is expected later this month on the Riyadh stock exchange.
Saudi Arabia relied on domestic and regional investors to sell a 1.5 per cent stake. Sources told Reuters earlier that Aramco may also exercise a 15 per cent "greenshoe" option, allowing it to increase the size of the deal to a maximum of $29.4 billion. Aramco has declined to comment on the IPO pricing. A formal announcement is expected later on Thursday, the sources said.
"After the last few much-hyped global IPOs didn't go through, Saudi Aramco's IPO has certainly shown that 'where there's a will there's a way'. It is food for thought for similar such entities who can go the IPO way, which will not only lift the moral of regional capital markets but also bring wider financial inclusion in such state-owned jewel enterprises," said Arshad Khan, co-founder and CEO of Arabian Bourse.
Diversify from oil
The IPO is the culmination of a years-long effort to sell a portion of the world's most profitable company and raise funds to help diversify the kingdom away from oil and create jobs for a growing population.
"The amount raised by the IPO itself is relatively contained given the size of the economy and medium-term funding requirement of the transformation plan," said Monica Malik, chief economist at Abu Dhabi Commercial Bank. "Nevertheless, combined with other areas of funding, we believe that there is meaningful capital in place to progress with the investment plans aimed at diversifying the economy."
The government promoted the investment as a patriotic duty, particularly after Aramco's oil facilities were attacked in September, temporarily halving the kingdom's oil output.
Alibaba's listing in Hong Kong this month had bids for 40 times the number of shares on offer.
Sources have said the Abu Dhabi Investment Authority (Adia) and Kuwait Investment Authority (KIA), sovereign wealth funds of two of Saudi Arabia's Gulf allies, planned to invest in the deal. The Adia declined to comment, while the KIA did not respond to requests for comment.
Aramco has planned a dividend of $75 billion for 2020, more than five times larger than Apple's payout, which is already among the biggest of any S&P 500 company.
Crude prices up
Oil prices rose on Thursday after the news Brent crude futures were up 55¢, or 0.87 per cent, to $63.55 a barrel by 1522GMT. Brent surged 3.6 per cent on Wednesday.
West Texas Intermediate (WTI) crude futures were up 27¢ to $58.70 a barrel, their highest since late September.
The Opec ministers met on Thursday in Vienna and Opec+ will meet on Friday to vote on the extension.
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