Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

'Vindication' - Saudi Arabia hails 10% debut jump in Aramco shares

CommoditiesDec 11, 2019 07:14AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

By Marwa Rashad, Saeed Azhar and Stephen Kalin

RIYADH/DUBAI (Reuters) - Saudi Aramco (SE:2222) shares surged the maximum permitted 10% above their IPO price on their Riyadh stock market debut on Wednesday, in a move hailed by the government as a vindication of its towering $2 trillion valuation of the state oil company.

The shares leapt to 35.2 riyals ($9.39) each, up from the initial public offering (IPO) price of 32 riyals and at the daily limit of price moves allowed by the Tadawul exchange.

That gives Saudi Arabian Oil Co (Aramco) a market value of about $1.88 trillion, comfortably making it the world's most valuable listed company and closing in on the $2 trillion price tag long coveted by Saudi Crown Prince Mohammed bin Salman.

"It's a great day for Saudi Arabia and the leadership of Saudi Arabia and for the people of Saudi Arabia. It's a D-Day for Aramco, it's a day of reckoning and vindication," Energy Minister Prince Abdulaziz bin Salman told Reuters in Madrid.

Aramco raised a record $25.6 billion in its IPO last week, the culmination of a years-long effort by the Crown Prince to open up the energy giant to outside investors and raise funds to help diversify the economy away from oil.

But the kingdom cut back original plans to sell a 5% stake and include a foreign listing after lukewarm interest from international investors worried about Aramco's governance, the environment and regional instability - particularly after drone attacks on major Aramco facilities in September.

The company sold just a 1.5% stake and relied on mainly domestic and regional buyers.

Prince Abdulaziz said last week that Aramco was worth well over its IPO valuation of $1.7 trillion and predicted investors who didn't buy into the offering would be "chewing their thumbs" after missing out.

The flotation propels the Riyadh bourse into the world's top 10 by value of listed companies.

The early share price gain values Aramco at more than six times U.S. oil major Exxon Mobil Corp (XOM); more than twice Saudi Arabia's annual gross domestic product; and far ahead of U.S. tech giant Apple's (O:AAPL) $1.2 trillion price tag.

"This is a successful IPO and the Aramco listing will add depth to the local market by providing exposure to a vital sector of Saudi Arabia's economy," said Bassel Khatoun, managing director, frontier and MENA at Franklin Templeton Emerging Markets Equity.

"We are hopeful that Saudi Aramco uses the Tadawul listing as a springboard to an eventual international listing."

But investing in Aramco is a bet on the price of oil and growth in global demand for crude is expected to slow from 2025 as global steps to cut greenhouse gas emissions are rolled out and the use of electric vehicles increases.

'GROWTH POTENTIAL'

Finance Minister Mohammed al-Jadaan told Reuters the bulk of the IPO proceeds would be used on domestic projects, while the global buzz around the listing would help attract foreign capital into the Saudi economy.

"Productively deployed, we believe the assets could also help maintain growth potential through our three-year ratings horizon," credit ratings agency S&P said in a recent report.

Aramco's debut comes as oil prices are being supported by a Saudi-orchestrated move by OPEC and oil producing allies to commit to some of the industry's deepest output cuts in a decade to try to avert oversupply.

Aramco shares began trading half an hour after the market open as the bourse allowed extra time for investors to place bids in the "opening auction" in anticipation of high demand.

Aramco chairman Yasir al-Rumayyan and Tadawul's top executives rang the bell to start trading. Within the first hour, 766.8 million shares had changed hands, more than for any other Riyadh listed stock.

Aramco stock will become part of Tadawul index by next week and global benchmarks such as MSCI and FTSE later this month, which analysts said should fuel demand, particularly from investors who track such indexes.

The Saudi index (TASI) was up 1.1% at 1115 GMT.

Saudi retail investors who hold their Aramco shares for six months from the first day of trading can get up to 100 bonus shares, or one for every 10 held, which could limit supply of the stock, said Zachary Cefaratti, CEO of Dalma Capital.

Aramco will have the second biggest weighting on the Tadawul index of 9.7%, according to Al Rajhi Capital. Al Rajhi Bank (SE:1120) has the biggest weighting at 14.6% due to its larger free float.

If Aramco shares gain 10% on both Wednesday and Thursday, its valuation will surpass $2 trillion. The company is expected to be included in the MSCI emerging markets index on Dec. 17.

Aramco did not name its investors during the IPO process, but sources familiar with the matter have told Reuters the Abu Dhabi Investment Authority (ADIA) and Kuwait Investment Authority (KIA) bought shares.

'Vindication' - Saudi Arabia hails 10% debut jump in Aramco shares
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Chin Jimmy
Chin Jimmy Dec 11, 2019 5:30AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
how's this divesting from oil?
Chin Jimmy
Chin Jimmy Dec 11, 2019 5:30AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
more like oil to luxury yachts and aeroplanes
Jesse James
Jesse James Dec 11, 2019 5:00AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I will never invest my money in people whom think wearing sheets over there heads is normal.
Yousef saeed
Yousef saeed Dec 11, 2019 5:00AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
There is not even a single person in Saudi Arabia who cares about your 500 dollars you have, you may keep it in your bucket.. . . thanks.
Muhammed Khaleel
Muhammed Khaleel Dec 11, 2019 5:00AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Jesse you rascist TNUC (read backwards) we dont give a fly's rear end about what you think of our garb... you may take your $2 jeans and $1.5 T shirt and torn shoes to your inbred household
Barani Krishnan
Barani Krishnan Dec 11, 2019 3:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
It can even go up 30%. Investors are basically family, friends and local businessmen who had the fear of God put into them to buy into this thing. The fact that the float was done at home itself allows them to do ANYTHING they want with it ... and all the more why the world should never believe in this thing.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email