On Wednesday, December 11, the first trading in shares of the energy company Saudi Aramco started in Saudi Arabia. Entering the stock exchange (IPO) of the largest oil corporation in the world became one of the main events of the global energy market in 2019 and provoked a stir among investors.
So, at the opening of the trading session, the price of one share of Saudi Aramco was 10% higher than the previously announced level and amounted to $ 9.4. Note that on December 5, the company announced plans to sell securities at $ 8.53 apiece.
“I think this is a standard situation for all such IPOs. When they conduct large-scale training to attract investors and use all available media resources for PR, the corresponding excitement arises. As a result, the value of the shares jumps up after the placement, ”said Narek Avakyan, Head of Investor Relations, BCS Broker, in an interview with RT.
During the IPO, Saudi Aramco intends to sell 1.5% of securities in the amount of $ 25.6 billion. It is expected that the placement of shares in the oil giant could exceed the volume of the Chinese Alibaba Group ($ 25 billion) and become the largest in history.
According to Saudi Aramco, the cost of the state-owned corporation is estimated at approximately $ 1.7 trillion. It is curious that the amount significantly exceeds the figures of the most expensive companies in the global stock market. For comparison: at the moment, Apple has a market value of $ 1.19 trillion, Microsoft - $ 1.15 trillion, Alphabet (owned by Google Inc.) - $ 927 billion, Amazon - $ 862 billion. Such data are quoted by the NASDAQ exchange.
For the first time, the idea of an IPO Saudi Aramco was proposed by the authorities in 2016 and became one of the main points of the Saudi Arabia reform program “Vision 2030”. The strategy is aimed at changing the structure of the economy and reducing the kingdom's dependence on oil. According to experts, the implementation of the plans requires large budget injections. The authorities are planning to attract a significant part of these investments through the sale of shares in Saudi Aramco.
“Saudi Arabia has ambitious plans to transform not only the oil industry, but also the technological modernization of the entire industrial complex and reforms in the country's socio-economic life. All this inspires investors with optimism, which is confirmed by the high demand for the company's shares, ”Boris Dolgov, senior researcher at the Center for Arab and Islamic Studies at the Institute of Oriental Studies of the Russian Academy of Sciences, told RT.
According to experts, investors are attracted by the high profitability of the Saudi oil company. As Moody's international rating agency previously calculated, the net profit of Saudi Aramco in 2018 amounted to about $ 111.1 billion. According to this financial indicator, the commodity giant outperformed Apple ($ 59.6 billion), Samsung ($ 35.1 billion) and Alphabet ($ 30 7 billion).
Back in 2017, the world's largest stock exchanges began to fight for the right to become a platform for IPO Saudi Aramco. For example, Donald Trump called on Saudi Arabia to place the company's shares in New York. At the same time, the British government actively promoted the idea of listing in London and provided the Saudis with a credit guarantee of $ 2 billion. However, the management of the company so far decided to place its shares on the Tadawul national stock exchange.
Price of success
It is noteworthy that earlier the Saudi authorities estimated the state corporation at $ 2 trillion. According to RT analysts polled, the final cost was lower due to tensions in the Middle East and lower world oil prices. Over the past year, a barrel of Brent fell from almost $ 80 to $ 63. Moreover, an attack on the corporation’s enterprises in early autumn was also a negative factor for Saudi Aramco.
In September, drones attacked the Saudi Aramco refineries. As a result, the company suspended production of about 5.7 million barrels per day. Thus, oil production in the kingdom fell by half.
However, by the beginning of October, the company was able to completely restore oil production. As economic analyst Ahmad Yasin told RT, the resumption of Saudi Aramco’s work in such a short time only increased investor interest in the IPO.
“It is worth noting how quickly and efficiently the company managed to restore the level of oil production. Such a development of events only strengthened the desire of investors to increase their investments in the Saudi market. Investors have gained additional confidence that companies like Aramco are able to withstand the serious geopolitical challenges and their consequences in the Middle East, ”explained Yasin.
In general, RT analysts surveyed differently evaluate the further dynamics of the value of Saudi Aramco shares. Narek Avakyan believes that after a sharp increase, quotes may briefly drop to $ 7-7.5. At the same time, the head of the analytical department of AMarkets, Artem Deev, predicts a further rise in the price of securities. According to him, a successful IPO of a Saudi company could provoke an increase in oil prices.
“In the coming days and until the end of 2019, stocks may show growth, and therefore the company's capitalization will grow to the expected $ 2 trillion. Thus, the market will confirm its agreement with the initial assessment of Saudi Aramco. This may be a signal for oil prices to move above the current level of $ 64-65 per barrel with the prospect of further growth, ”the source said.