Oil giant Saudi Aramco seeks $1.7 trillion valuation in IPO

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Aramco CEO and president Amin H Nasser, and chairman Yasser al-Rumayyan at the Plaza Conference Center in Dhahran, Saudi Arabia. Photo: Hamad I Mohammed/Reuters

Bankers working on the stock market listing of state oil giant Saudi Aramco have set an official share price range, valuing the company at as much as $1.7tn (£1.3tn) at the top end of the target.

Saudi Aramco, the state-owned oil giant, confirmed in a document on Sunday that it will seek to sell shares at a price between 30 Saudi Arabian riyal (£6.18) and 32 Saudi Arabian riyal (£6.59).

The range values the company at between $1.6tn and $1.7tn, which would make it the world’s most valuable listed business. That crown is currently held by Apple (AAPL), which is worth $1.1tn.

Saudi Aramco hopes to raise $25bn selling 1.5% of its stock, which will be listed for trade on Tadawul, the Saudi Stock Exchange. At the top end of forecasts, it would also be the world’s biggest IPO.

Bankers working on the deal will now move on to the ‘book building’ phase to determine the final share price, and therefore valuation. This involves asking institutional investors how much stock they would buy at what price and then setting a final price reflecting demand to ensure all stock is sold in the IPO. The final price is due to be announced on 5 December, with trading likely to commence later next month.

While the valuation range is eye-catching, it is below what Crown Prince Mohammed bin Salman reportedly wanted.

The prince originally hoped to sell as much as 5% of the state oil company, with a portion of shares listed overseas, and hoped the company would be valued at $2tn, according to the Financial Times. He has since scaled back his ambitions in the face of weaker than hoped for international demand.

The push to float part of Aramco is part of Prince Bin Salman’s efforts to raise funds to help diversify the Saudi economy away from oil. Saudi Aramco is the world’s most profitable company but the global push towards green energy means this position may not be sustainable long-term. Aramco’s revenue fell almost 7% to $217bn in the first nine months of the year. Pre-tax profit declined by 14% to £136.5bn.