Abu Dhabi, UAEFriday 25 September 2020

Saudi Aramco shares to begin trading on Wednesday

The state oil company will issue 3 billion shares at a price of 32 riyals each

A Saudi Aramco worker at the Tanajib facility in Saudi Arabia. Dubai-based fund manager Dalma Capital suggested institutional demand could drive Saudi Aramco's valuation above $2bn after its shares begin trading on the Tadawul exchange on Wednesday. EPA
A Saudi Aramco worker at the Tanajib facility in Saudi Arabia. Dubai-based fund manager Dalma Capital suggested institutional demand could drive Saudi Aramco's valuation above $2bn after its shares begin trading on the Tadawul exchange on Wednesday. EPA

Saudi Aramco's shares will begin trading on the Saudi stock exchange, Tadawul, on Wednesday, December 11.

Raising $25.6 billion in the world’s biggest initial public offering, the oil company's shares will trade under the symbol '2222' with a 10 per cent daily price fluctuation limit, according to a bourse statement on Friday.

"On the first day of trading only, the opening auction for the Saudi Arabian Oil Company (Saudi Aramco) will be extended for 30 minutes," Tadawul said in the statement.

With a 30-minute extension on the opening auction, Aramco's trading session will start from 9:30am to 10:30am on December 11, and trade continuously from 10:30am to the usual market close auction at 3:00pm.

State oil giant Saudi Aramco will issue 3 billion shares at a price of 32 riyals each, meaning the 96 billion riyals (Dh94bn) raised will be the highest for a stock market debut. The deal values the world's most profitable company at $1.7 trillion, Saudi Aramco said in an announcement on Thursday.

The company also said that it had granted an option to the IPO's stabilising manager, Goldman Sachs Saudi Arabia, allowing for an additional 450 million shares to be issued to cover over-allotments for an offer that closed more than 4.6-times oversubscribed. If the option is granted, these additional shares could be issued at the offer price at any time during the first 30 days of trading, and would bring the total amount raised via the IPO to 110.4bn riyals.

Given that the institutional tranche of the offer was more than 6x oversubscribed, it is "highly likely" that Goldman Sachs will exercise this option, Dubai-based fund manager Dalma Capital said in a note on Sunday.

Even if it is, the offer will remain 4x oversubscribed, which is likely to push prices higher once the shares begin trading. The inclusion of the company in emerging market indexes by MSCI, FTSE Russell and S&P Dow Jones will create incremental buying of $3.4bn, it added, as passive funds tracking them buy up shares.

"In light of these dynamics, we believe that it is likely that we will see Aramco bid up to $2tn or higher in the first days of trading. This would validate our thesis that Aramco's pricing fell short of $2tn to leave upside on the table for Saudi and GCC investors, allowing them to benefit from the listing of Saudi's crown jewel," Dalma Capital's note said.

Opec and allies led by Russia on Friday pledged to cut 2.1 million barrels per day from the global oil markets from the beginning of next year, deepening their current restrictions as they look to rebalance the oil markets.

The Riyadh-Moscow led alliance will deepen existing cuts by an additional 500,000 bpd. Saudi Arabia and other producers would make "additional voluntary adjustments" of around 400,000 bpd, meaning an overall withdrawal from the market of about 2.1 million bpd, Opec said.

In an interview with CNBC on the sidelines of the Opec meeting on Friday, Saudi Arabia's energy minister Prince Abdulaziz bin Salman said that the decision to cut production had not been timed to coincide with the Saudi Aramco listing.

"The timing of the Opec meeting was decided way [back] in June, the timing of the IPO was decided more recently," Prince Abdulaziz said.

He added that the Saudi Aramco was the biggest energy company in the world.

"It can never be evaluated by a tweak here, or a tweak there or a 1 percent here or 1 percent there," Prince Abdulaziz said.

He said the decision to list a 1.5 per cent stake in the company on the Tadawul first was taken "because we wanted to make sure that the valuation benefit goes to first and foremost to our people, our endowments, to our friends, to those who believe in Saudi Arabia in Aramco, believe in Saudi Arabia," he said.

Updated: December 7, 2019 07:05 PM

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