The Saudi Aramco share price defied international investor cynicism today as it rose 10% on its debut trading day on the Riyadh stock exchange. The upsurge from the 32 riyals, around £6.48, IPO pricing of the shares, which were sold at the upper end of the range, has taken the company’s market value to $1.9 trillion. That puts it ahead of Apple’s current $1.2 trillion valuation by some distance, making Saudi Aramco the new most valuable publically traded company in the world.
The company, which is still majority owned by Saudi Arabia, is worth more than the combined value of the next five largest oil and gas supermajors. The IPO, also the biggest in history after it raised $25.6 billion to beat the $25 billion raised by Chinese ecommerce giant Alibaba when it floated on New York Stock Exchange in 2014. Saudi Aramco is also the most profitable company in the world, posting a net income of $111 billion (£84 billion) last year.
The float can be, at least for now, considered a positive culmination of a protracted route to the IPO eventually taking place, having been mooted for up to 3 years. The 10% share price growth will also surely be considered a win for the Saudi administration after a lukewarm response from international investors. Planned roadshows in international financial hubs including New York and London were abandoned amid expressions of scepticism at the company’s valuation and investor unease at the Saudi regime’s politics, governance and record on human rights.
Despite only 1.5% of the Saudi Aramco equity having been given up in the float, the listing will still account for just under 10% of the combined equity value listed on Riyadh’s Tadawal stock exchange.
The 10% gain today is said to have been largely driven by strong domestic demand, though Reuters reported that the Abu Dhabi Investment Authority and Kuwait Investment authority were also major investors. It’s possible that a larger gain could have resulted were it not for the fact that the Tadawul has a 10% cap on daily share price fluctuations before it suspends trading until the opening bell of the following session.
Trading of Saudi Aramco shares began 30 minutes after the opening bell, rung by Yasir al-Rumayyan, governor of Saudi Arabia’s sovereign wealth fund, and the exchange’s executives in a special ceremony, this morning to give the exchange a buffer to place bids in an orderly fashion.
Markets will be keen to see if the rally can be sustained over tomorrow and coming trading sessions, to take Saudi Aramco’s market capitalisation beyond the $2 trillion initially targeted by Crown Prince Mohammed bin Salman, the de facto Saudi ruler. He plans to invest the funds raised through the sale of part of the company’s equity to fund his economic modernisation and diversification programme away from reliance on oil revenues.
Saudi Aramco’s history dates back to 1933 when it was formed under the original name of the California-Arabian Standard Oil company before it was bought out by the Saudi Arabia state. With full rights to Saudi Arabia’s reserves, the most valuable known reserves in the world, Saudi Aramco’s output accounts for one in every eight barrels of oil produced internationally.