Saudi Aramco starts trading, gaining 10 per cent and reaching USD1.8T

RIYADH, Saudi Arabia (AP) – Saudi Arabia’s oil company Aramco began trading for the first time yesterday, gaining 10 per cent in its first moments on the market in a dramatic debut that pushed its value to USD1.88 trillion, higher than any other listed company in the world.

The state-owned oil giant started trading on the Saudi Tadawul stock exchange after a mammoth USD25.6 billion initial public offering that set the record as the biggest ever in history. Trading for Aramco shares began at 10.30am in Riyadh.

Aramco, owned by the state, has sold a 1.5 per cent stake, pricing its shares before trading at SAR32, or what is USD8.53.

At a pre-trading auction earlier in the morning, bids for Aramco reached the 10 per cent limit on stock price fluctuation allowed by Tadawul. That pushed the price of Aramco shares to SAR35.2, or USD9.39 a share.

This makes Aramco more valuable than Microsoft or Apple, two of the top listed companies in the world.

Workers in Aramco’s oil separator at a processing facility in Abqaiq, near Dammam in the Kingdom’s Eastern Province. PHOTO: AP

Aramco is selling 0.5 per cent of its shares to individual retail investors — most of whom are Saudi nationals — and one per cent to institutional investors, most of which are Saudi or Gulf-based funds.

Only Saudi citizens, residents of Saudi Arabia or nationals of Gulf Arab states were permitted to buy Aramco shares as individual investors.

Saudi 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 the millions of young Saudis entering the workforce.

What the 34-year-old Crown Prince had initially sought was a USD2 trillion valuation for Aramco and the sale of up to five per cent of the company – on an international stock exchange as well as the Saudi market – that could raise USD100 billion.

Instead, potential buyers outside Saudi Arabia thought his USD2 trillion valuation was too high. With gains made on the local Tadawul and strong local support, the company could reach the USD2 trillion mark in trading on the local exchange.

The strong demand for Aramco’s stock, however, has so far been mostly supported by Saudi and some Gulf-based funds, rather than international investors. To encourage Saudi citizens to buy and keep hold of Aramco stock, the company said it will pay a dividend of at least USD75 billion in 2020. Individual Saudi investors who hold their shares for six months from the first day of trading can receive up to 100 bonus shares, or one for every 10 held.

The government encouraged Saudis by making it easier to access credit for stock purchases.

The result was that just over five million individuals, nearly all of them Saudi nationals out of a population of around 20 million citizens, generated subscriptions of USD13 billion.Institutional investors, many of them Saudi or Gulf-based funds, raised more than USD100 billion during the book-building period that closed last week. Less than quarter of that, or 23 per cent, was raised from non-Saudi investors, according to Aramco’s lead IPO adviser Samba Capital.

Aramco has exclusive rights to produce and sell the kingdom’s energy reserves. It was founded in 1933 with America’s Standard Oil, and became fully owned by Saudi Arabia by 1980.