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12 December 2019

Saudi Aramco closes in on Crown Prince Mohammed’s $2 trillion goal

A gain of less than seven per cent would lift Saudi Aramco to $2 trillion, the target that Crown Prince Mohammed Bin Salman first mentioned almost four years ago.

Bloomberg/Matthew Martin

Saudi Aramco’s market value after one day of trading is closing in on the $2 trillion market value sought by the Kingdom’s de facto leader, despite scepticism from international investors, reported Bloomberg.

The energy giant capitalisation jumped from $1.71 trillion in its initial public offering (IPO) to $1.88 trillion at the end of the first trading session this week in Riyadh. The stock finished at SAR 35.20, rising the 10 per cent limit allowed by the Saudi bourse, in the world’s biggest share offering.

If the stock keeps climbing on 12 December 2019 that gap will widen, making a potential international listing harder. Many foreign managers who refrained from buying the shares also cited corporate governance concerns and threats to the company’s facilities following the September 2019 drone attacks.

Still, the debut was cheered by Saudi and Gulf investors, who see the stock price supported by Saudi Aramco’s guaranteed dividends, buying by index-tracking funds and the fact that the region doesn’t have any other listed major oil companies.

Reuters reported that Saudi Aramco’s IPO process has been a struggle since the Crown Prince announced in 2016 his plan to raise as much as $100 billion via an international and domestic listing of a five per cent stake.

The listing plans were halted in 2018 and when the deal was revived this summer, it found little interest beyond the Gulf. Riyadh scaled back its ambitions and cancelled roadshows in New York and London, selling just a 1.5 per cent stake and relying on mainly domestic and regional buyers.

The flotation propels the Tadawul into the world’s top 10 by the value of listed companies. Saudi Aramco stock will become part of the Tadawul index by next week and global benchmarks such as MSCI and FTSE later this month, which analysts expect to fuel demand, particularly from investors who track such indexes.

RELATED STORIES: Saudi Aramco MSCI FTSE Tadawul Crown Prince Mohammed Bin Salman





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