Saudi Aramco reaches $2tn valuation on second day of trading

Saudi Aramco’s shares leapt by 10 per cent at the opening of its second day of trading on 12 December, touching a valuation of $2tn, before falling back after the start of trading.

Despite paring back from the opening price of SR38.7 on Thursday morning, the SR37.3 the mid-session trading SR37.3 price represents an impressive growth of the SR35.2 reached at the close of the first day of trading.

A $2tn valuation had been long-sought by Saudi Arabia’s Crown Prince Mohammed bin Salman, the driving force behind the decision to list shares in the world’s largest oil company as part of the kingdom’s ambitious Vision 2030 economic reform programme.

However, international investors were sceptical over the viability of the $2tn target, with concerns over transparency and regional security resulting in global analysts putting a more conservative $1tn-$1.5tn estimate on the firm.

As a result of the lukewarm reaction from international investors, Aramco scaled back initial plans to list 5 per cent of the company through a dual-listing on the local Tadawul and an international stock exchange. In the end, Aramco offered just 1.5 per cent of shares on the local stock exchange.

Riyadh relied heavily on local corporate investors and investment funds from neighbouring GCC states, with the Kuwaiti government believed to have invested as much as $1bn in the IPO. The listing was four times oversubscribed, with the oil major receiving total bids of $119bn.

The significant local and regional interest resulted in Aramco raising $25.6bn when the IPO closed on 6 December, with the oil company overtaking Microsoft Corp and Apple Inc as the world’s most valuable listing.

While the $1.7tn valuation achieved following the IPO fell $300bn shy of the Prince Mohammed’s target, impressive trading for the opening two days has brought relief Aramco’s executives and the Saudi rulers following four years of planning and uncertainty.