Saudi Aramco raises $25.6bn in record IPO
Mohammed Bin Salman misses out on $2tn valuation in largest ever IPO
The state-backed oil and gas giant, Saudi Aramco, has raised $25.6bn (£19.5bn, €23.1bn) in its initial public offering, the largest IPO in the world.
The largest oil company on earth fell short of the $2tn (£1.5tn, €1.8tn) valuation coveted by Crown Prince Mohammed bin Salman.
On Thursday Aramco shares sold at the top of the range set out in November, at 32 Saudi riyals ($8.53, £6.50, €7.71) each. This gave the company a market valuation of $1.7tn (£1.3tn, €1.5tn). The listing was oversubscribed with soliciting bids near 4.7 times more than Aramco actually wanted.
The IPO is the jewel in the crown of Mohammed Bin Salman’s Saudi Vision 2030, which seeks to diversify the Kingdom’s economy, reducing its dependence on oil and gas revenue.
The public listing came as Saudi Arabia was locked in discussions with other OPEC nations and its allies in OPEC+ at the biannual meeting in Vienna. The Kingdom had pressed for a reduction in oil production, hoping to boost the global oil price and thus give Aramco an easy landing onto the public markets.
For most of 2019 the Kingdom has been cutting its oil production by more than it had previously agreed to. According to a Reuters survey, in November Saudia Arabia cut production by 783,000 barrels per day, 461,000 barrels more than it had pledged to.
By all accounts Saudi Arabia has been successful in its ambitions. A new deal has just been announced in which OPEC and its non-member allies, such as Russia, have agreed to reduce total oil output by 1.7 million barrels a day. This figure is more than analysts and commentators thought could be compromised on. Such a reduction will ensure in the short term that Aramco will continue to trade well following its IPO. Only a 1.5 per cent stake of Aramco, one of the most profitable companies in the world, was listed.
While Aramco and Saudi officials initially hoped to list internationally and attract major international investment, such interest was not forthcoming. Wealthy Saudi families, and the sovereign wealth funds of Gulf neighbours such as Abu Dhabi and Kuwait instead account for the majority of investors.
The muted but smooth success of Aramco’s IPO will be greeted by other states in the region wishing to do the same. Earlier this week, Oman Oil signalled its intention to list between 20 and 25 per cent of its share in 2020.
FURTHER READING: Oman Oil Co sets sights on IPO in 2020
FURTHER READING: Saudi Arabia lobbies Opec and allies to deepen oil production cuts