State-owned oil giant Saudi Aramco has chosen to tap into its listing's greenshoe option, effectively raising the size of its already record-breaking initial public offering (IPO). By exercising its over-allotment option, Saudi Aramco has raised its IPO by more than $3.8 billion to a total of $29.4 billion.
Under the option, Saudi Arabia's oil monopoly issued an additional 450 million shares to the country's local exchange. A greenshoe option in an IPO is typically reserved as a stabilizing mechanism that can be used by the listing company as a way to prevent its shares from falling below its initial offering price. Although, there are some cases, where the option is tapped by the listing company as a way to satiate an increased demand for its stock.
In the case of Saudi Aramco, its shares never fell below its initial IPO price. This means that the company will essentially be able to take in the proceeds of the greenshoe option as additional profits. According to the company, the issuance of the additional shares was made during the IPO's book building process. This essentially means that no shares were being offered on the market as part of the option.
Saudi Aramco made its historic debut in its home country's exchange last month. Since it's listing, the company has lost more than $200 billion in value from its post-IPO peak. The oil company listed 3 billion of its shares during its IPO, around 1.5 percent of its total stake. Priced at $8.53 apiece, the company managed to raise $25.6 billion during its debut.
In the weeks that followed, Saudi Aramco's shares surged by more than 10 percent, nearly reaching the $2 trillion valuation targeted by Crown Prince Mohammed bin Salman. Since mid-December, the company shares have slumped slightly, further exacerbated by the rising tensions between the United States and Iran.
Last week, Saudi Aramco's stock prices slid further down as investors prepared for the worse as the US and Iran escalated their offensive measures against each other. The stock slid to its lowest point after the United States assassinated Iranian military commander Qasem Soleimani in a drone strike in Iraq. Investors expected the worse following the assassination as Iran had vowed to retaliate against the US for the murder of Soleimani. Iran then launched its own attack on US military personnel stationed near its borders. US President Donald Trump stated in an interview last week that no casualties were reported during Iran's attack.
