The largest initial public offering (IPO) in history had exceeded expectations on Wednesday, sending Saudi Aramco's shares up by 10 percent as investors scrambled to get a piece of the oil and gas giant. The state-owned oil company debuted on Saudi Arabia's domestic exchange on Wednesday morning, with the company listing 1.5 percent of its shares.
Just hours after the company listed its shares in Riyadh, prices spiked to as high as $9.38 per share, hitting the exchange's daily limit. The price essentially raises the market valuation of Saudi Aramco to $1.88 trillion, making it the most valuable listed company in the world. Apart from being the most valuable company, Saudi Aramco's IPO is also the largest in history, beating Alibaba's $25 billion IPO in 2014.
Saudi Aramco originally expected valuation of $1.7 trillion when it announced its share pricing last week. Despite now reaching $1.88 trillion, the valuation is still well below the $2 trillion-valuation expected by Crown Prince Mohammed bin Salman for his Vision 2030 program. The figure, however, is in line, albeit slightly higher, with expectations announced by banks and financial analysts earlier in the year, which was a range of between $1.5 trillion to $1.8 trillion.
The crown prince first disclosed the idea of listing the state-owned company in 2016. The country apparently plans to use the proceeds of the listing for the crown prince's Vision 2030 program, which is aimed at diversifying Saudi's economy away from oil and gas.
Saudi Aramco's listing this week was preceded by a week-long local investor roadshow to generate interest in the IPO. The company's local listing was many times oversubscribed in the days leading up to the debut. Among the biggest investors in the IPO were the kingdom's allies in the Gulf, including Kuwait and the United Arab Emirates.
According to reports citing sources close to the matter, Kuwait Investment Authority had reportedly investment more than $1 billion in the IPO. Meanwhile, Abu Dhabi's investment in the listing reportedly exceeded $1.5 billion. Samba Capital revealed last week that around 10.5 percent of the offers for Saudi Aramco's shares had come from foreign investors. The rest of the offers apparently came from Saudi-based investment funds, companies, and wealthy local families.
While interest in the company's shares remains high, there are some investors who have expressed concerns over the risks involved in the company's operations. The more obvious risk includes oil supply, demand, and prices, all of which are controlled by the Saudi government given their dominant position in OPEC. There is also concern over security in the company's facilities, which was the target of a drone attack in September.
