News | Published December 08 2019

Saudi Aramco reaches record in share sales

State-owned Saudi Aramco has raised a record amount of $25.6 billion [£19.4 billion] in share sales after stakes in the company were offered out to the public in Riyadh.

Saudi banks had offered citizens cheap credit to help bid for shares, priced at 32 Saudi riyals [$8.53] each on Thursday, which ended up being heavily oversubscribed according to local reports.

The total volume of stock sales broke the previous record set on the New York Stock Exchange in 2014, when stakes in Chinese company Alibaba were sold at a total value of $25 billion.

The IPO will value the company at $1.7 trillion when trading reopens, rendering it the most valuable listed company in the world.

Crown Prince Mohammed bin Salman is looking to diversify Saudi Arabia’s economy and move away from being dependent on oil, with the state hoping that selling off shares in Aramco would help raise the tens of billions of dollars needed to invest in creating new industries.

The initial plan was to raise $100 billion through two share listings, one on Saudi's own Tadawul bourse, and one overseas.

However, concerns from abroad over the excessive valuation of the company, the impact of climate change on the industry, political risks and limited corporate transparency forced Aramco to rethink its plans, culminating in shares going on offer to the Saudi public amid an aggressive domestic marketing campaign to entice local investors and those from elsewhere in the Gulf to purchase cheap shares en masse.

The IPO's heavy valuation of the company came after Saudi Arabia met with fellow members of the Organization of the Petroleum Exporting Countries [OPEC] to address oil production, as the market struggles with a slowdown in worldwide growth and growing momentum in new oil production from elsewhere.

The member nations, who provide 40 per cent of the world's oil, mutually agreed to reduce oil output an effort to lift global oil prices, which fell in 2014 putting oil-dependent countries under strain.

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Authored by

Scott Challinor
Business Editor
December 08 2019

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