Wednesday, December 11, 2019

The Saudi Aramco IPO - Daily Briefing

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  • IPO

Saudi Aramco shares surge 10% on market debut

Shares in Saudi Aramco surged 10% to 35.2 riyals, the maximum move allowed in intra-day trading, on their market debut on Wednesday, valuing the world’s biggest and profitable company at $1.87 trillion.

The sharp move came during an opening auction that the Riyadh’s stock exchange extended by 30 minutes longer than usual, with Saudi Aramco accounting for nearly half of the total trading volumes on the market.

Many analysts and fund managers had predicted the dramatic gain, due to scarcity value. Saudi Aramco’s IPO, which offered 1.5% of the company and raised $25.6 billion, was over 4.6 times oversubscribed. Just over 5 million Saudi individual investors applied for shares, while Saudi corporates took 37.5% of the institutional tranche and Saudi government institutions were allocated 37.5% and 13.2% of the institutional tranche respectively.

Many analysts expect the inclusion of the Saudi Aramco on major emerging markets index to be fast-tracked, which would prompt incremental buying by global passive funds.

The listing means that Saudi Aramco easily dwarfs other stocks on the Tadawul and immediately elevated the exchange to the ninth biggest in the world in terms of market capitalisation, overtaking India and closing in on Germany and Canada.

In an interview this week, Saudi Arabia’s finance minister, Mohammed Al-Jadaan, said that the proceeds from the IPO would be reinvested, helping to create more revenue channels for the government. The transaction is a key part of the Kingdom’s plan to transform its economy by reducing its reliance on oil, developing its financial markets and attracting increased levels of foreign direct investment.