RIYADH • State-owned oil giant Saudi Aramco’s initial public offering (IPO) will be the biggest in history, but will fall short of the towering US$2 trillion (S$2.7 trillion) valuation long sought by Crown Prince Mohammed bin Salman.
Aramco priced its IPO at 32 riyals per share, the top of its indicative range, the company said in a statement, raising US$25.6 billion (S$34.8 billion) and beating Alibaba Group’s record US$25 billion listing in 2014.
At that level, Aramco has a market valuation of US$1.7 trillion, comfortably overtaking Apple as the world’s most valuable listed firm.
But the listing, expected later this month on the Riyadh stock exchange, is a far cry from the blockbuster debut originally envisaged by the Crown Prince.
Aramco did not say when shares would start trading on the Saudi stock market but two sources said it was scheduled for Wednesday.
Saudi Arabia relied on domestic and regional investors to sell a 1.5 per cent stake after lukewarm interest from abroad, even at the reduced valuation of US$1.7 trillion.
Alibaba’s listing in Hong Kong this month had bids for 40 times the number of shares on offer.
Demand for Aramco shares from institutional investors, including Saudi funds and companies, reached US$106 billion, while retail investment demand hit US$12.6 billion. Around 4.9 million Saudi retail investors have bought shares in the oil giant, including 2.3 million aged between 31 and 45.
Aramco’s advisers said they may partly or fully exercise a 15 per cent “greenshoe” option, allowing the size of the deal to be increased to a maximum of US$29.4 billion.
The pricing comes as the Organisation of the Petroleum Exporting Countries is gearing up to deepen oil supply cuts to support prices.
Climate change concerns, political risk and a lack of corporate transparency put foreign investors off the offering, forcing the kingdom to ditch ambitions to raise as much as US$100 billion via an international and domestic listing of a 5 per cent stake.
Even at a US$1.7 trillion valuation, international institutions baulked, prompting Aramco to scrap roadshows in New York and London and focus instead on marketing a 1.5 per cent stake to Saudi investors and wealthy Gulf Arab allies.
The IPO is the culmination of a year-long effort to sell a portion of the world’s most profitable firm and raise funds to help diversify the kingdom away from oil and create jobs for a growing population.
The government promoted the investment as a patriotic duty, particularly after Aramco’s oil facilities were attacked in September, temporarily halving the kingdom’s oil output.
Aramco has planned a dividend of US$75 billion for next year, more than five times larger than Apple’s payout, which is already among the biggest of any S&P 500 company.
But investing in Aramco is also a bet on the price of oil and growth in global demand for crude, which is expected to slow from 2025 as steps to cut greenhouse gas emissions are rolled out and the use of electric vehicles increases.
The IPO also carries political risk as the Saudi government, which relies on Aramco for the bulk of its revenues, controls the company.