Saudi Aramco pushes over $2 trillion valuation

Saudi Aramco pushes over $2 trillion valuation
December 12, 2019, 9:33 am

Saudi Aramco and stock market officials celebrate during the official ceremony marking the debut of Aramco's IPO. (File photo AP)

Saudi Aramco’s stock price shot up to 38.7 riyals ($10.32), pushing the company’s valuation to $2.06 trillion on Thursday, hitting the target envisioned by Saudi Arabian authorities, as the oil giant begins its second day of trading on the Saudi Stock Exchange (Tadawul).

The company’s valuation dipped below the $2 trillion mark after opening before recovering in late morning trade.

The company began trading on the Tadawul Wednesday following its record-breaking initial public offering (IPO) which raised $25.6 billion. Aramco’s share price came to market fixed at 32 riyals ($8.53), but shot up immediately after listing to 35.2 riyals ($9.39), the maximum gain permitted by a 10 percent fluctuation limit on the stock. It stayed at 35.2 riyals throughout the day.

The company’s new valuation hits the $2 trillion target set by authorities, following Aramco’s IPO in which the company was priced at $1.7 trillion. The new valuation is in line with Saudi Arabian Crown Prince Mohammed bin Salman’s original 2016 announcement of a partial sale of Aramco when he stated that the company’s true value is $2 trillion

“It’s a great company…well managed and in that regard it’s somewhat different from other government-owned oil companies in the world where many of them have a reputation for inefficiency,” said Jay Ritter, an IPO expert and professor at the University of Florida.

Aramco’s blockbuster IPO comes after a series of lackluster IPOs globally, including WeWork’s scrapped IPO, and lukewarm investor response to Uber’s IPO, which has contributed to negative sentiment globally towards IPOs.

This sentiment is, “largely focused on high growth tech stocks, particularly money losing high tech startups,” said Ritter.

“Nobody is going to confuse Uber technologies with Saudi Aramco,” he added in reference to the oil giant’s IPO performance.

The proceeds from the IPO could rise to $29.4 billion should the oil giant exercise an option to sell 15 percent more stock, a senior banker said on Monday.

Wassim al-Khatib, Head of Investment Banking at National Commercial Bank, said the so-called greenshoe option – a provision that grants the underwriter the right to sell more shares – could be implemented.

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