Looks like Saudi's Aramco's $2trn initial valuation may come true despite west's skepticism. But will it hold true 6 months from now?
The shares closed at 35.2 riyals ($9.39) each, up from the initial public offering (IPO) price of 32 riyals ($8.53)At $2 trillion, Aramco would pay shareholders a dividend equivalent to a return of less than 4%, well below what other major oil companies pay.Saudi only listed 1.5% of the company – half of initial expectations and this follows the 4.65 times over-subscription seen in Aramco’s IPO
Saudi Aramco shares surged the maximum permitted 10% above their IPO price on their Riyadh stock market debut on Wednesday.
The shares closed at 35.2 riyals ($9.39) each, up from the initial public offering (IPO) price of 32 riyals ($8.53).
That gives Saudi Arabian Oil Co (Aramco) a market value of about $1.88 trillion, comfortably making it the world’s most valuable listed company and closing in on the $2 trillion price tag long coveted by Saudi Crown Prince Mohammed bin Salman.
The biggest IPO in history raised $26.5 billion in cash before trade started.
Some 1.1 billion riyals worth of Aramco shares changed hands, more than a quarter of the Saudi market’s traded value.
Aramco stock will become part of Tadawul index by next week and global benchmarks such as MSCI and FTSE later this month, which analysts said should fuel demand, particularly from investors who track such indexes.
Insiders noted that more than three-quarters of its shares were bought by either Saudi nationals, or investors in neighboring Gulf states, namely Abu Dhabi.
Saudi Crown Prince Salman has promised Saudis who hold the stock will be rewarded with 100 free Aramco shares for every 10 they have by the middle of 2020.
Saudi oil minister Prince Abdulaziz bin Salman said in an interview at an OPEC meeting in Vienna last week: “Those who have not subscribed in Aramco will be chewing their thumb to the point that I will be worried about them that they go and fix themselves in the hospital.”
The consensus from foreign investors was around a valuation of around $1.2 trillion, but ranged between $800 billion and $1.5 trillion.
“Up to $1.5 trillion based on dividend,” was the feedback from Franklin Templeton, the emerging markets specialist and among the most generous.
The problem for many investors was summarized in two words: dividend yield. At $2 trillion, Aramco would pay shareholders a dividend equivalent to a return of less than 4% on their money, well below what Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp. and other major oil companies pay.
Hadi Khatib is a business editor with more than 15 years' experience delivering news and copy of relevance to a wide range of audiences. If newsworthy and actionable, you will find this editor interested in hearing about your sector developments and writing about it. [email protected]