Saudi Aramco IPO pushes Tadawul bourse to top exchanges for fundraising, but Hong Kong remains No 1 globally
- State-owned oil company’s IPO raises US$25.6 billion, topping Alibaba Group Holding’s record offering in 2014
- Hong Kong among bourses that pushed for dual listing of Aramco’s shares
Saudi Aramco, the state-owned oil producer of the Kingdom of Saudi Arabia, has raised US$25.6 billion in its much-anticipated initial public offering, propelling the Saudi stock exchange into the top bourses globally.
Saudi Arabian Oil Company, known as Aramco, set the final price of its shares, to be traded on the Tadawul exchange in Riyadh, at 32 riyals (US$8.53) each, at the top end of the expected range and valuing the world’s most profitable company at US$1.7 trillion. It received total bids for shares of US$119 billion.
The IPO, which surpassed the US$25 billion record fundraising five years ago in New York by Alibaba Group Holding, the owner of the South China Morning Post, is a landmark achievement for Saudi Crown Prince Mohammed bin Salman and his ambition to overhaul the kingdom’s economy.
The Aramco offering moved Tadawul to fourth globally for capital raising this year, with five offerings attracting a combined US$26.6 billion from investors, according to figures from financial data provider Dealogic. It has previously ranked 25th globally.
The Hong Kong stock exchange is number one globally, with 131 listings raising a combined US$37.2 billion this year, according to Dealogic. Alibaba raised US$12.9 billion in a secondary listing in Hong Kong last month, the third biggest technology offering on record behind its own IPO in 2014 and Facebook’s IPO two years earlier.
In terms of just IPOs and first time listings, the Saudi bourse moved to second globally after the Hong Kong stock exchange, surpassing both the New York Stock Exchange and Nasdaq, according to financial data provider Refinitiv.
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Still, coming at a time when the price of crude oil hovers near a six-month low, the Aramco IPO is a huge step down from the 2016 target of US$100 billion when the prince first floated the idea of the fundraising.
For months, global stock exchanges clamoured for the chance to host Aramco’s listing. Hong Kong’s Financial Secretary Paul Chan Mo-po pitched for the city’s bourse, but the company eventually settled for listing only 1.5 per cent of its shares in Riyadh, after global investors balked at the prince’s original target of a US$2 trillion valuation.
The listing of Aramco, a saga that has dragged on for nearly four years, is part of Prince Mohammed’s plans to broadly change the country’s economy and reduce its reliance on oil.
Those plans, however, have faced a variety of challenges ranging from backlash globally over the murder of Jamal Khashoggi, a Saudi journalist and columnist for The Washington Post, at the kingdom’s consulate in Istanbul in 2018 to drone attacks on two Saudi oil facilities in September.
The IPO also has been challenged by the price of oil, which has traded below US$60 a barrel in recent days. The Organization of Petroleum Exporting Countries and Russia agreed to cut oil production on Thursday in hopes of boosting prices globally.
After many global investors balked at the proposed valuation, Aramco relied heavily on interest from local investors and funds in the Gulf region. The kingdom also decided against a dual listing to speed the IPO, which had been discussed for several years.
To entice investors, Aramco offered the world’s richest dividend of US$75 billion annually and cut the tax rate investors would have to pay. It also ultimately lowered the valuation it was seeking. The offering attracted interest from institutional investors of US$106 billion.
If an overallotment of shares is fully exercised, the offering will raise US$29.4 billion.
Once it begins trading on December 11, Aramco is expected to overtake Apple and Microsoft as the most valuable company globally based on market capitalisation.
