Saudi Arabia on Thursday launched the much-anticipated initial public offering of its state-owned oil firm, Saudi Aramco, taking the company to a whole new level in the global ranking.
In what is the largest IPO ever, Aramco raised $25.6 billion, surpassing the $25 billion raised by Chinese e-commerce group Alibaba in its 2014 debut on Wall Street. The IPO also put Aramco’s value at $1.7 trillion.
Although falling short of the $2 trillion target set by Crown Prince Mohammed Bin Salman, the valuation places the oil producer ahead of Apple Inc. and Microsoft Inc. – the only two other companies worth over $1 trillion globally – as the largest publicly-traded company.
According to reports, this is the first time in ten years that the world’s largest company will be from outside the United States. The last company to achieve such feat was PetroChina Co. in 2009.
Across the world, other companies in the running to join the elite $1 trillion club are Amazon.com Inc., Google parent company Alphabet Inc., and Chinese tech giants Alibaba and Tencent Holdings.
The IPO, which accounts for just 1.5 percent of Saudi Aramco’s authorized share capital, was launched with pricing at the high end of the target range, reports say. By December 12, Aramco will begin to trade 3 billion units of shares on the local Tadawul Stock Exchange at a starting price of $8.53.
Aramco had on November 28 disclose that retail subscriptions reached almost 11.5 billion euros, with nearly five million subscribers and about 1.5 billion shares sold. This exceeded the company’s target of one billion shares.
Reports, however, indicate that most of the new shareholders are Saudis as most foreign investors remain unsure about investing in the state-controlled oil firm due to several issues.
Over time, external investors and analysts have expressed concerns around problems of transparency, governance practices, security, as well as profitability in the face of harsh environmental policies around the world.
Regardless, the company’s share price is expected to continue to rise and Aramco plans to raise additional funds from international markets. The company said it depended on the reception it received on the Riyadh-based stock exchange.
As part of efforts aimed at attracting investors, the oil producer has promised to pay $75 billion in dividends next year and additional free shares if investors hold their shares for some time.
The Aramco stock offering represents a critical part of Prince Mohammed’s Vision 2030 – an economic diversification plan meant to shift Aramco from an oil-producing company into a global industrial conglomerate.
