Saudi Aramco traded limit up in its public debut on Wednesday, leaping 10% to 35.20 riyals in Riyadh when trading got going.
The opening surge hands Crown Prince Mohammed a $1.88 trillion valuation for the kingdom’s crown jewel. That’s still short of his $2 trillion target for the behemoth, but he’ll likely hit the mark soon enough. “Today’s positive publicity will probably generate enough excitement to push the world’s biggest publicly-traded company beyond the magic $2 trillion mark”, Bloomberg’s Eddie van der Walt remarked.
A laughably overwrought ceremony at the Fairmont in Riyadh featured confetti, green lasers and guests huddled on stage around a golden bell.
Aramco of course raised $25.6 billion in the IPO, making it the largest offering ever, surpassing Alibaba’s 2014 mark.
“The Saudis took considerable steps to ensure success today”, Bloomberg’s van der Walt went on to say. As late as Tuesday evening, reports were still trickling in suggesting Prince Mohammed was leaning on locals. According to a pair of unidentified sources who spoke to the Financial Times, the Saudis made one last push to “persuade” local institutions and wealthy families to snap up shares after the IPO in a bid to drive up the price. The focus, the people said, was getting to the $2 trillion valuation.
State investment funds are being encouraged to buy the stock. The Public Pension Agency, the Public Investment Fund and PIF’s Sanabil Investments unit are all expected to assist in bolstering the stock now that trading is off and running. Families, meanwhile, have been “asked” to pony up more cash.
“We are happy on the results today”, CEO Amin Nasser told CNBC. “And you have seen the market responds to our results, the company will continue to be the leader globally when it comes to the energy sector and at the same time we are looking at sustained and growing dividends to our investors. At the same time we continue our growth strategy, increasing profitability across cycles”.
The world’s largest publicly traded company has one of the smallest free floats. With just 1.5% of the company sold, the Saudis have effectively ensured that demand outstrips supply.
Early last month, Aramco announced a series of changes to the company’s royalty regime and a marked reduction in the tax rate applicable to its downstream business in an effort to attract investors. Additionally, Aramco will pay some $75 billion in dividends in 2020, on top of any special payouts. Saudi retail investors in the IPO will be awarded one free share (a “bonus share”) for every 10 allotted shares they “continuously and uninterruptedly” hold.
Still, Riyadh is being forced to lean heavily on rich locals, many of whom Prince Mohammed already tapped for some $100 billion during his farcical “corruption crackdown” in November of 2017.
“Aramco should easily get to the $2 trillion valuation as soon as tomorrow; there is plenty of appetite for it”, Marie Salem, the head of institutions at Daman Securities in Dubai, told Bloomberg Wednesday.
Proceeds from the IPO will be funneled to the Public Investment Fund, and Riyadh has indicated that quite a bit of the money will be spent locally.
Saudi Arabia’s equity market will enjoy a near 400% rise in market capitalization thanks to Aramco’s listing. It is now the seventh largest stock market on the planet.
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Wonder how Aramco stock will do when it is listed on a major exchange and exposed to trading and shorting by institutions, HFs, and algos not under the watchful Royal thumb. Might see unusually large spreads between the foreign and local price.