Aramco has successfully raised $ 25.6 billion for its IPO

Saudi oil giant Aramco has raised $ 25.6 billion for what will become the biggest IPO in history, two sources familiar with the matter told AFP on Thursday.

Aramco has indeed exceeded the 25 billion dollars raised by the Chinese group of online commerce Alibaba in 2014 when it entered Wall Street.

The funds raised value the Saudi company at 1,700 billion dollars, far ahead of Apple (1,200 billion), Microsoft (1,140 billion) and Alibaba (1,051 billion).

However, this is less than the 2,000 billion dollars targeted by Crown Prince Mohammed bin Salman, nicknamed MBS, when the project was announced four years ago. At the time Aramco wanted to raise $ 100 billion and had to postpone the operation twice for want of satisfaction.

The Saudi group should take its first stock market steps in the local market, Tadawul, on December 12 by selling 3 billion shares, or 1.5% of the capital, at a unit price of 32 riyals (8.53 dollars), have said the sources again.

This is the top of the range of 30 to 32 riyals that the group had set itself last month, while the big banks advising the company in this transaction had asked the Saudi authorities to be careful to avoid shaking during the first days of listing.

An official announcement is expected this Thursday.

Overvalue

It was mainly the Saudis who subscribed to this operation, the large foreign investors questioning governance, the group’s ability to protect its oil installations and the sustainability of its profits in the face of tougher environmental policies around the world. 

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Some foreign investors wonder if they will have a say in governance given the grip of the Saudi government on the company, while others consider Aramco overvalued compared to rivals like ExxonMobil, Royal Shell Dutch or Chevron.

Last week, the company announced that retail subscriptions, which ended on November 28, had reached around 11.5 billion euros, with nearly five million subscribers.

To encourage the Saudis to buy securities, many initiatives had been launched, such as the facilitation of loans offered by banks and nationalist speeches making investment a patriotic duty.

Aramco also held out to local investors promises of higher dividends and the possibility of obtaining free other shares if they keep their shares for some time. It promises $ 75 billion in dividends in 2020.

Some of the wealthiest families in Saudi Arabia have been pushed to invest, including billionaire prince Al-Walid ben Talal, one of the businessmen locked up in the Ritz-Carlton hotel in Ryad during a crackdown “anticorruption” of 2017.

The funds raised by Aramco when it went public should be used to finance the diversification of an economy now ultra-dependent on black gold.

Aramco is the economic jewel of Saudi Arabia and produces around 10% of the world’s oil, so buying the company’s stocks is like betting on the continuing rise in black gold prices. The company is considered to be the pillar of the economic and social stability of the kingdom.

It has still not completely abandoned its plan to raise additional funds by entering an international financial center like New York, but this is based on the reception it will have on the local stock exchange.

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Saudi Arabia thus has every interest in seeing oil prices rise, which could be guaranteed by a further reduction in production by the 14 member countries of the Organization of the Petroleum Exporting Countries (OPEC) and their ten partners.

OPEC and the latter are having delicate discussions this Thursday and Friday in Vienna, Austria, to decide whether to take it a step further. 

In the meantime, Aramco has, for the time being, canceled plans to introduce it in the United States, Europe or Asia and has abandoned the plan to sell 5% of its capital.

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