Daily Management Review

Saudi Aramcos’ IPO Values The Company At $1.7 Trillion


Saudi Aramcos’ IPO Values The Company At $1.7 Trillion
The valuation derived form from its initial public offering (IPO) was $1.7 trillion for Saudi Aramco which is now officially now the world's most valuable company. The Saudi Arabian state owned oil giant raised $25.6 billion from the IPO.  
The valuation of Aramco was comfortably greater than Apple.
The price set for each share of Aramco at its IPO was at 32 riyals ($8.53) which was at the top of its predictive range which helped the company to raise $25.6 billion which was more than the $25 billion that was raised by Alibaba in its IPO in 2014 which was a record till Aramco’s IPO.
According to reports, Aramco could exercise a 15 per cent "greenshoe" option that could help the company to further increase the size of the deal to a maximum of $29.4 billion.
It is expected that the stocks of the company will start trading on December 11 at the Riyadh stock exchange. Despite the record valuation, the valuation of the company from its IPO is lower than the $2 trillion that valuation that was put forward by the Saudi Crown Prince Mohammed bin Salman.
Aramco had initially intended to sell about 5 per cent of the company at the stock exchange and aimed ot raise as much as $100 billion through international and domestic listings.
However, international institutions were off the offering by because of a lack of corporate transparency at Aramco, political risks and climate change concerns despite at the $1.7 trillion valuation. Saudi Arabia thus sold 1.5 percent stake to domestic and regional investors and offered citizens cheap credit to bid for shares.
This valuation of Aramco comes at a good time as the for Organisation of the Petroleum Exporting Countries (OPEC) and other oil producers led by Russia are gearing up to deepen production cuts to prevent a possible oil glut and to support stabilization of global crude prices. This could happen later this week at a meeting in Vienna.
There have not been any recent comments made by Saudi Arabia about whether Aramco could also list itself abroad.  
The Saudi government and authorities have been trying hard to sell a portion of the most profitable company of the world, which has now culminated in the Aramco IPO. The aim of the Saudi owners is to raise funds to finance its diversification drive of the kingdom and reduce its dependency on oil while creating jobs from other business sources for its growing population.
Interest was relatively muted for the Aramco IPO compared with other emerging market IPOs despite the push for the IPO and the offer of loans for financing share purchases. For example, bids for 40 times the number of shares on offer were made for Alibaba's listing in Hong Kong.
"The amount raised by the IPO itself is relatively contained given the size of the economy and medium-term funding requirement of the transformation plan. But combined with other areas of funding we believe that there is meaningful capital in place to progress with the investment plans aimed at diversifying the economy," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.