Saudi Aramco shares open at 35.2 riyals, valuing it at $1.88 trillion

Saudi Aramco’s shares soared to hit the 10 percent limit to reach 35.2 riyals ($9.39) per share on its trading debut on Wednesday, giving the oil giant a valuation of $1.88 trillion, and making it the most valuable company in the world ahead of Apple Inc, and the five largest energy majors.

Shares worth more than 750 million riyals ($200 million) had exchanged hands by 11:28 Saudi Arabia time.

Should Aramco’s share price gains hold on Wednesday, the company could reach a $2 trillion valuation on Thursday – the inital target price that authorities targeted.

Aramco set its IPO price at the top end of an indicative price range of 30 riyals to 32 riyals per share ($8-$8.53) and raised $25.6 billion, making it the largest IPO in history.

Saudi Aramco CEO Amin Nasser said he was “happy” with the company’s debut, Reuters quoted him as saying.

The strong demand for Aramco’s shares signals investor appetite for a mega-cap energy stock. An OPEC+ decision to rein in an oil glut by deepening the current output cut by 500,000 barrels a day is expected to prop up oil prices.

Saudi Aramco may float on the stock market at a valuation below the $2 trillion the Kingdom initially targeted, but it will soon rise above that level on the open market, Prince Abdulaziz bin Salman, the Kingdom’s Energy Minister said last week.

The listing is a cornerstone of Saudi Arabia’s Vision 2030 plan, which aims to wean the Kingdom off its reliance on oil to diversify the economy. The proceeds from the listing will go towards these diversification initiatives and could be invested in sectors such as logistics, mining, or developing the manufacturing and industrial economy.

The proceeds from the IPO could rise to $29.4 billion should the oil giant exercise an option to sell 15 percent more stock, a senior banker said on Monday.

Wassim al-Khatib, Head of Investment Banking at National Commercial Bank, said the so-called greenshoe option – a provision that grants the underwriter the right to sell more shares – could be implemented.

Investors have long been attracted to Aramco for its profitability and for having the lowest average cost of crude oil production in the world, at around $3 a barrel. It also sits on one of the biggest oil reserves in the world, about four times larger than those of its next biggest competitor ExxonMobil.

The company, which plans to pay a base dividend of $75 billion in 2020, reported a profit of $111.1 billion in 2018 and $46.9 billion in the first half of 2019.

Saudi Aramco’s IPO will enhance the company’s governance, transparency, operational excellence, and financial discipline, said Yassir al-Rumayyan, chairman of Saudi Aramco and Governor of the Public Investment Fund. He was one among a group of senior executives to preside over the bell-ringing ceremony at Tadawul.

Aramco’s listing will place the Saudi Stock Exchange within the top 10 exchanges globally, the exchange’s head Sarah al-Suhaimi said.

The inclusion of the company would lead to the TASI – the main index – outperforming other developing countries in terms of profitability and shareholder returns, Aljazira Capital analysts wrote in a research note earlier.