Aramco set to become first $2 trillion company
Oil giant Aramco could potentially become the world's first company to reach $2 trillion size when it begins trading on Tadawul on December 11, say analysts.
Zachary Cefaratti, CEO of Dalma Capital, believes that Aramco will be included in the MSCI, FTSE and S&P emerging market indices shortly after listing.
"We expect this to take place on a fast-track basis within 2 weeks and to lead to incremental buying of $3.4 billion (Dh12.5 billion). In light of these dynamics, it is likely that we will see Aramco bid up to $2 trillion or higher in the first days of trading, and potentially to trade limit up on the first day," he said.
Aramco had received $119 billion bids for its $25.6 billion offering, a 465 per cent oversubscription overall. Energy major had priced its shares at the top of the range at 32 riyals share, valuing the company at $1.7 trillion. Dalma Capital also participated in the oil giant's IPO through its three funds.
Wassim Al Khatib, head of investment banking at National Commercial Bank, told Al Arabiya on Monday that Aramco exercised an option to sell 15 per cent more shares, resulting in its IPO proceeds rising to $29.4 billion. Non-Saudi investors received 23 per cent of institutional portion while Saudi Public Pension Agency received 11.5 per cent of institutional tranche.
Analysts believe that Aramco's strong balance sheet and dividend plans will supports its shares. The company will pay at least $75 billion dividend per year till 2024.
Allied Investment Partners said announcement of extending oil cuts last week is likely to act as a catalyst for equities in the coming weeks. "Furthermore, this should also be positive for the upcoming Aramco IPO, as it should be supportive of current valuations on the back of expected improvement in oil prices," it said in a note.
Nearly 4.9 million individual investors applied for shares in the Aramco IPO and the retail portion was oversubscribed 1.5 times while the institutional tranche got subscribed by 2.95 times.
"This means there is a lot of pent up demand which should drive share prices higher," says Vijay Valecha, chief investment officer at Century Financial.
Recent Opec cut, he said, should help put a floor on the oil price and support Aramco shares.
He noted that index compilers like MSCI and FTSE Russel are likely to fast track the company's inclusion in global benchmarks which could trigger $2 billion to $3 billion worth of inflows.
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