Aramco raises $25.6bln in biggest-ever IPO

Riyadh: Saudi Aramco priced its long-awaited IPO at the high end of the target range, raising $25.6 billion and giving the energy giant a valuation of $1.7 trillion in the world´s biggest stock sale.

Aramco priced its initial public offering at 32 riyals ($8.53) per share, surpassing the $25 billion raised by Chinese retail giant Alibaba when it debuted on Wall Street in 2014.

The sale of 1.5 percent of Aramco was oversubscribed 4.65 times, the energy giant said in a statement, but the scaled-down IPO is still a far cry from the blockbuster originally planned by Crown Prince Mohammed bin Salman.

The much-delayed stock sale, first announced in 2016, was initially expected to raise as much as $100 billion from the sale of up to five percent of the company. The IPO is the bedrock of Prince Mohammed´s ambitious strategy to overhaul the oil-reliant economy by pumping funds into non-energy industries.

But sceptics say the IPO´s proceeds would barely cover the kingdom´s budget deficit for a year. The market launch puts the oil behemoth´s value at $1.7 trillion, far ahead of other firms in the trillion-dollar club: Apple ($1.2 trillion), Microsoft and Alibaba ($1.1 trillion).

However, it fell short of the $2 trillion mark that de facto ruler Prince Mohammed was aiming for.

Aramco will begin trading three billion shares on the country´s Tadawul stock exchange December 12 at a starting price of 32 riyals, two sources told AFP. That price is at the top of the range set last month, 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 IPO is heavily focused on Saudi and other Gulf traders as international investors have remained sceptical about the secretive company´s targeted valuation, as well as harbouring doubts over its transparency and governance practices.

There are also concerns about dipping profitability as Aramco has acknowledged that climate change concerns could reduce demand for hydrocarbons and see global oil demand peak within the next 20 years.