Saudi Aramco to raise US$25.6 billion in world's biggest IPO

New York

SAUDI Arabia's giant state-owned oil company, Saudi Aramco, has set the price of its initial public offering (IPO) at a level that will raise US$25.6 billion, a sum that is expected to make it the world's biggest IPO, according to two people briefed on the pricing plan.

Saudi Aramco set the initial price at 32 riyals (S$11.60) a share, the high end of the range that it forecast last month, the sources said. It plans to sell three billion shares, representing 1.5 per cent of the company. At that price, the company would be worth US$1.7 trillion.

The amount to be raised by the sale exceeds the US$25 billion raised by Alibaba, the Chinese online retail company, in its IPO five years ago on the New York Stock Exchange. The total proceeds could grow if additional shares are released for sale. The two sources said that these additional shares would bring the total raised closer to US$30 billion.

The IPO establishes Aramco as one of the world's most valuable companies, but the US$1.7 trillion figure falls short of the Saudi royal family's hopes of an offering that would value the company at close to US$2 trillion.

Global investors proved to be skittish over the earlier valuations offered by the Saudi government. While its filings showed Aramco to be immensely profitable - it posted a profit of US$68 billion for the first nine months of the year - its earnings have declined, and risks such as global warming and geopolitical instability cast a pall over its prospects.

Aramco will sell its shares on the Riyadh stock market, the Tadawul. Trading is expected to begin next Wednesday.

The IPO process has been an agonisingly slow since Crown Prince Mohammed bin Salman - Saudi Arabia's de facto ruler - first raised the idea, making the crown jewel of the Saudi economy a public company more than two years ago.

After big early promises, the Saudis have taken a more cautious approach, restricting the listing initially to Saudi Arabia in order to avoid the more rigorous disclosures that would be required in New York or London. NYT

READ MORE: No Riyadh rush as many global investors steer clear of Aramco