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Saudi Aramco share price: Biggest sale in history

State-owned oil and gas company Saudi Aramco has raised a record US$25.6 billion, making it the world’s biggest share sale.

Source: Bloomberg

Oil and gas corporation Saudi Aramco has taken the honour of being the world’s biggest initial public offering (IPO).

The state-owned enterprise has raised a record US$25.6 billion on the Tadawul exchange, making it the largest new IPO in history.

The company officially confirmed a market valuation of US$1.7 trillion on 05 November, offering a 1.5% stake in the listing as initially planned at a price of 32 riyals (US$8.53) per share.

This means Saudi Aramco has overtaken Alibaba's US$25 billion offering on the New York Stock Exchange in 2014. It will also become the world's largest publicly traded company by valuation, surpassing Microsoft Corp. and Apple Inc.

The deal amount could increase to as much as US$29.4 billion, if the Saudi Arabian firm decides to utilise a “greenshoe”, or over-allocation option amounting to 15%, Reuters has reported.

Shares oversubscribed

The company said it had received bids totalling US$119 billion, over five times the number of shares offered. Some five million retail investors have applied for shares, while the institutional tranche attracted applications amounting to 397 billion riyals.

The announcement comes after months of speculation about the company’s initial public offering amount and share price, which were rumoured to be in the range of US$1.6 billion to US$1.7 billion.

Saudi Arabia Crown Prince Mohammed bin Salman, the driving force behind the listing, had initially sought a valuation of US$2 billion.

Saudi Aramco had been meeting with representatives from sovereign funds in the lead up to this announcement, in a bid to drum up support and interest from institutional investors.

Plans to list the company were first announced in 2016. The Saudi Stock Exchange has not made known if Saudi Aramco is allowed to list overseas, according to reports.

Weighing the Aramco stock

Last month, IG UK Chief Market Analyst Chris Beauchamp wrote that Aramco stocks ‘might be a wonderful investment, with the initial public offering (IPO) a savvy move by a forward-looking Saudi government’, but that ‘it could also be a major headache’.

He warned that investors should be made aware of ‘potential pitfalls’, which include ‘anything from war and revolution to just political disturbances and regular crackdowns on dissidents’.

Furthermore, with oil demand weaker as of late, he reckons that some investors might believe the valuation has been set too high, adding that it remains to be seen how trading day will go.

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