It’s been a loooong time coming, but Saudi Aramco finally priced its initial public offering on Thursday, officially becoming the largest IPO in history. Despite a $1.7T (yes, T, not B) valuation, Crown Prince Mohammed bin Salman had this to say: “meh.”
If you remember, bin Salman was gunning for a $2T valuation. You know the old proverb… shoot for the journ-, I mean, moon… even if you miss… you’ll still hit a $1T+ valuation.
MbS’ high hopes were dashed by investors who were skittish given a drop in demand for crude oil, geopolitical risks and people who drive Prius’ (read: changing energy habits).
Money in the bank
Still, Saudi Aramco was able to sell 3B shares, on its way to raising $25.6B. For reference, that’s more than Alibaba brought in during its 2014 market debut… which raised just $25B. The deal isn’t set in stone, though. Aramco said last month that it was open to selling even more shares.
Breaking down the doors
Investors were chomping at the bit to get their hands on that sweet, sweet oil money. By Tuesday, demand for Aramco stock had reached almost $60B. That means that underwriters will likely flip the switch on an “overallotment option,” triggering the release of an additional 450M shares, which would bring Aramco’s total haul up to $30B.
For the investors that got in, Saudi Aramco gave them a little something to look forward to. The oil magnates promised to pay out more than $75B in dividends through 2024.
Home field advantage
When shares of Aramco begin trading next week don’t expect Jim Cramer to be live with the Crown Prince at the opening bell. Shares will trade exclusively on the Tadawul, Saudi Arabia’s stock exchange… for now. Aramco decided to keep it local rather than moving forward with the originally proposed dual listing in either New York or London.
The bottom line…
The cost of oil affects us all (well except your creepy uncle who lives off the grid), from suburban parents schlepping their kids to hockey practice to trillion-dollar Saudi oil juggernauts.
And the driving force behind the cost of oil is The Organization of the Petroleum Exporting Countries, or OPEC. Coincidentally, OPEC met in Vienna yesterday and agreed to deepen cuts on oil output by 40%.
Saudi Arabia, which controls Saudi Aramco (and is a card-carrying member of OPEC), was pushing for those cuts ahead of its IPO. Shocker.
Bottom line: “Internet money ain’t got sh*t on oil money.”