The state oil giant Saudi Aramco began trading on Wednesday, 11 December, 2019 on the Saudi Tadewul stock exchange. During the first trading day the price of its shares rose from an initial price of 32 riyals to 35.2 riyals. This made Saudi Aramco the world’s most valuable company, with a market capitalization of approximately US$ 1.9 trillion. The company’s Initial Public Offering (IPO) alone represented the largest public stock market entry, worth US$ 25.6 billion, surpassing the then largest global stock market entry made by the Chinese Alibaba Group worth US$ 25 billion.
Saudi Aramco (Saudi Arabian Oil Company) is the largest oil company in the world and its oil production accounts for about one-tenth of the world’s production. The company was founded in 1933 and currently employs around 60,000 permanent workers. Aramco’s daily production includes roughly 10 million barrels of oil a day, which is only slightly less than the current oil production of all US oil companies. Until recently, the Saudi Aramco production was higher than total US production, with daily total oil production in the United States reaching around 9 million barrels per day. Estimates suggest that oil giant Saudi Aramco extracts about 3 billion barrels of crude oil per year. According to analysts, in recent months oil prices on the global commodity market, have not been favorable regarding the valuation of this oil company. This has changed, which was the reason why Saudi Arabia has recently started partial privatization by IPO.
The price of oil on the global commodity market, based on investors’ assessments of all the potential risks in the world and related factors, especially in the Middle East region, led to the increased interest in the oil commodity. Increased interest in oil trading and the related increase in its price was supported by the recent OPEC oil cartel meeting in Vienna. At the end of Friday’s meeting on 6 December, 2019 OPEC countries along with its allies known as OPEC+ with strong influence of the Russian Federation, adopted an extension of the limitation of crude oil production in order to increase its price. It was also agreed to reduce crude oil production by 1.7 million barrels per day. On 11 December, 2019 at 2.17 pm CET, light US WTI oil traded on the commodity market at US$ 58.91 per barrel with a daily decline of -0.56% and North Sea Brent traded at US$ 63.89 per barrel with a daily decline of -0,70% due to profit withdrawal made by investors.
Saudi Aramco placed on the public stock market a total of 1.5% of its shares – 0.5% of the listed shares were available to individual retail investors, while the remaining 1% were for institutional investors. This 1% accounts to 2 billion shares. In the first 2½ weeks of the so-called book-building period of Saudi Aramco, 5.9 billion shares were listed. Saudi Aramco’s long-awaited IPO stock market entry as the world’s largest and most profitable company eventually succeeded. According to analysts and financial strategists, a continuing increase – at a moderate growth rate – can be expected.
