A sign advertising Saudi Aramco's initial public offering, at the Plaza Conference Centre in Dhahran, Saudi Arabia, November 3 2019. Picture: REUTERS/HAMAD MOHAMMED
A sign advertising Saudi Aramco's initial public offering, at the Plaza Conference Centre in Dhahran, Saudi Arabia, November 3 2019. Picture: REUTERS/HAMAD MOHAMMED

 New York — Saudi Arabia’s state oil company Aramco launched its initial stock offering on Thursday, pricing at the high end of the target range and raising $25.6bn, two sources said. 

The sum raised by the oil giant surpasses the $25bn garnered by the Chinese online trading group Alibaba in 2014 when it entered Wall Street.

The market debut also puts the Saudi oil behemoth’s value at $1.7-trillion, far ahead of other corporate giants in the trillion-dollar club: Apple ($1.2-trillion), Microsoft and Alibaba ($1.1 trillion).

However, it fell short of the $2-trillion mark the kingdom’s  Crown Prince Mohammed bin Salman was aiming for.

Aramco will begin trading 3-billion shares on the country’s Tadawul stock exchange on December 12 at a starting price of 32 riyals ($8.53), the sources said.

That price is at the top of the range set in November, even though the banks advising the company called on Saudi authorities to be cautious to avoid volatile price swings in the first days of trading. The official price announcement is expected later on Thursday on the offering covering just 1.5% of Aramco’s capital.

Saudi Arabian investors

The new private shareholders are mostly Saudis, as investors in London and New York have remained more sceptical due to questions about the firm’s transparency, governance practices and targeted valuation, as well as the ability of the group to protect its oil facilities and remain profitable in the face of tougher environmental policies around the world.

Last week, the company announced that retail subscriptions, ending November 28, had reached about €11.5bn, with nearly 5-million subscribers and nearly 1.5-billion shares sold — exceeding their target of 1-billion.

The government used a series of initiatives to encourage Saudis to buy a stake in the kingdom’s crown jewel, including offers of bank loans and nationalist rhetoric portraying the investment a patriotic duty.

Al-Waleed bin Talal

Aramco has also provided local investors with promises of higher dividends and the opportunity to obtain additional free shares if they hold their shares for some time. It pledged to pay $75bn in dividends in 2020.

Some of the wealthiest families in Saudi Arabia have been obliged to invest, including billionaire prince Al-Waleed bin Talal, who was among the businessmen locked up in Riyadh’s Ritz-Carlton Hotel during an “anticorruption” crackdown in 2017.

Aramco put off but has not abandoned its plan to raise additional funds by selling shares on a major international market such as  New York, but that will depend on the reception it receives at the Saudi Stock Exchange.

The company is considered the pillar of the kingdom’s economic and social stability and produces about 10% of the world’s oil, so investors are betting on the continued rise in oil prices.

Prince Mohammed has viewed the stock offering as a critical component of “Vision 2030”, a programme to diversify the Saudi economy and shift Aramco from “an oil producing company into a global industrial conglomerate”, according to the Saudi government website.

So the kingdom has a major stake in seeing global oil prices rise, which could be helped by a new agreement to cut production among the 14 member countries of Opec, as well as their 10 allies. Opec  is conducting delicate discussions on Thursday and Friday in Vienna regarding the production agreement and any further cuts.

AFP