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11 December 2019
INVESTMENT

Saudi Aramco debut trading to make Tadawul world’s ninth-biggest bourse

The energy giant raised $25.6 billion in the biggest-ever IPO, selling shares at SAR 32 each and valuing the company at $1.7 trillion, overtaking Microsoft and Apple as the most valuable listed company. Saudi officials pulled out all the stops to ensure that the stock trades higher.

Bloomberg/Mohammed Almuaalemi


Saudi Aramco will instantly spring the Tadawul, Saudi Arabia’s stock market into the ranks of the world’s largest when the state-owned oil producer’s shares begin trading on 11 December 2019 after its initial public offering (IPO), reported Bloomberg.

Zachary Cefaratti, the Chief Executive Officer at Dalma Capital Management, said, “It’s likely that we will see Saudi Aramco bid up to $2 trillion or higher in the first days of trading and potentially to trade limit up on the first day.

Dalma Capital Management bought shares in the IPO through three funds.

The start of trading in Riyadh marks the end of a near four-year plan that has been intertwined with Crown Prince Mohammed bin Salman’s rise to global prominence and his Vision 2030 plan to reform the Kingdom's economy. First announced in January 2016, the IPO set records but fell short of the $100 billion international offering with a valuation of $2 trillion that the prince once proposed.

Saudi Aramco is so big that it will easily dwarf the rest of the companies in the Saudi market, which have a combined value of about $500 billion. Adding in the oil producer,  the Saudi Arabia Stock Exchange will become the world’s ninth-biggest stock market, overtaking India and closing in on Germany and Canada.

Foreign investors balked at the prince’s sought-for valuation, citing concerns including governance issues and possible security threats to stay away from the stock. Still, final orders surpassed $119 billion, with authorities allowing lenders to boost loans beyond usual to support the sale.

Saudi Aramco’s IPO was said to have relied on some of the Kingdom’s richest families and also on cash from neighbouring allies such as the sovereign wealth funds of Kuwait and Abu Dhabi. GCC investors are confident the stock price has plenty of room to increase, boosted by incentives that go from bonus shares to fast inclusion in emerging-market benchmarks.

Goldman Sachs Group, acting as share stabilising manager, has the right to exercise an option to sell another 450 million shares. It could be executed in whole or in part up to 30 calendar days after trading begins.

The IPO proceeds will be transferred to the Public Investment Fund, which has made a number of bold investments, including into SoftBank Group’s Vision Fund and a $3.5 billion stake in Uber Technologies.

The proceeds of the Aramco deal alone are equal to more than a decade of IPOs on Tadawul which has already said that the company’s weighting in the main local benchmark will be capped at 15 per cent.

 


RELATED STORIES: Public Investment Fund IPOs Tadawul Saudi Aramco Crown Prince Mohammed bin Salman


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