The world's largest IPO on record, that of the Saudi Arabian Oil Company or Saudi Aramco, rocketed to the unheard-of valuation of $2 trillion on only the second day of its IPO Thursday at the local stock exchange, the Saudi Tadawul.
Saudi Aramco's shares surged 10% to 38.7 riyals ($10.32) at the opening but retreated to 37 riyals minutes later. Analysts expect the share price to weaken further as the trading day commences. Recovery is quite possible, however.
Saudi Arabia on Wednesday made history by listing 1.5% of the state-run oil Saudi Aramco on the Saudi Tadawul in what is now the largest IPO in history by far. Saudi Aramco shares rose to 35.2 Saudi riyals ($9.38) from 32 riyals in early deals in Riyadh, up 10% and hitting their daily limit. The spike gave the company a valuation of $1.88 trillion on its first day of trading.
This massive amount also surpassed its earlier valuation of $1.7 trillion. This estimate was revealed when share pricing was disclosed last week at the top of the market range. Analysts noted, however, the $1.88 trillion valuations was below Riyadh's initial target. Geeting here relied heavily on local investors after Saudi Aramco canceled international roadshows due to tepid foreign interest.
Saudi Aramco CEO Amin Nasser the company was pleased with the day's results.
"We are progressing based on what was decided, which is to (price) Aramco at 32 riyals per share, which was agreed based on full analysis and evaluation," said Nasser to CNBC.
"We are happy on the results today. And you have seen the market responds to our results, the company will continue to be the leader globally when it comes to the energy sector and at the same time we are looking at sustained and growing dividends to our investors. At the same time we continue our growth strategy, increasing profitability across cycles."
The stunning move beyond $2 trillion on the second day of its IPO, while brief is a personal triumph for Saudi crown prince Mohammad bin Salman, 32, who first publicly floated the idea of an IPO in 2016. Back then, bin Salman announced his plans to sell shares in Saudi Aramco, the most profitable company in the world. Saudi Aramco also produces 10 percent of the world's oil and its huge revenues keep the Saudi state alive.
The IPO for initially planned for 2018 and was expected to raise more than $100 billion for a new sovereign wealth fund. In the process, the IPO would create the world's most valuable listed company. MBS then predicted Saudi Aramco would be worth at least $2 trillion and perhaps as much as $2.5 trillion. To put that into perspective, the world's most valuable company, Apple Inc., had a market cap of $1.2 trillion on Wednesday.
The IPO's financial advisors and banks earlier this year, however, lowered expectations to anywhere between $1.5 trillion and $1.7 trillion.
Proceeds from the Saudi Aramco IPO will go to bin Salman's Vision 2030 program aimed at transforming the Saudi economy away from oil and into technology.
