In Depth

Saudi Aramco valued at $1.7 trillion in world record IPO

The Saudi government will retain a 98.5% stake in what will be the most valuable public company ever

Saudi Aramco, Saudi Arabia’s state-owned oil company, has raised $25.6bn (£19.5bn) with an initial public offering of a 1.5% stake in the company, an amount that values the oil giant at $1.7 trillion (£1.3 trillion).

The sum makes the oil behemoth the most valuable company in the world, surpassing tech giants Apple, Google, Microsoft, and Amazon. Its IPO is expected to be the world’s biggest ever, moving ahead of Alibaba’s record $25 billion 2014 filing.

Still, the valuation is less than the Saudi Royal family had initially wanted. Crown Prince Mohammed bin Salman - Saudi Arabia’s de facto ruler - had hoped to push much closer to the $2 trillion mark.

They may have received more by floating in one of the world’s financial capitals, but sought to avoid the scrutiny that would probably have brought. Shares in Aramco, which was named the world's most profitable company earlier this year, will instead trade on the Riyadh stock market, the Tadawul, from 11 December.

The lower prices has also been put down to the general trend away from fossil fuels internationally, as well as the prospect of a slowing global economy.

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In addition, Iran’s “aerial attacks on Aramco facilities in September highlighted to potential investors the geopolitical risks of operating in the Persian Gulf,” reports The New York Times. “More broadly, the killing of the dissident journalist Jamal Khashoggi by Saudi agents last year has hurt the reputation of Prince Mohammed, and may repel some investors.”

The IPO is a cornerstone of bin Salman’s attempts to modernise the Saudi economy, and diversify away from its dependence on oil. In theory, the funds raised will be reinvested to this end.

“The amount raised by the IPO itself is relatively contained given the size of the economy and medium-term funding requirement of the transformation plan,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “Nevertheless, combined with other areas of funding, we believe that there is meaningful capital in place to progress with the investment plans aimed at diversifying the economy.”

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