Aramco Supersizes IPO, Issues More Shares

Authored by Irina Slav via OilPrice.com,

Aramco has exercised the greenshoe option attached to its initial public offering, issuing another 450 million shares to raise an additional $3.8 billion, the company said as quoted by CNN.

As a result, the already record-breaking IPO of the Saudi energy giant has been pushed up to a total $29.4 billion.

Aramco listed 3 billion of its shares on the Tadawul exchange in early December and quickly touched the much-hyped $2-trillion valuation Crown Prince Mohammed was after when he decided to list a minority stake in the company.

After that, however, the shares retreated, and last week took a nosedive on the renewed tension between the United States and Iran, which indirectly threatens the security of Saudi oil supply due to its proximity to Iran and the mutual hostility between the two largest countries in the Middle East.

The greenshoe option, as CNN’s Claire Duffy notes in her report on the news, is commonly used by issuers to keep the stock from falling below the issuing price. This, however, is not the case with Aramco. The additional shares were allocated to buyers before the listing and they will not be floated on Tadawul.

Even so, the stock was down by 10 percent since the listing…

The top concern among investors is geopolitical right now, but this can change when the holding period instituted by the Saudi government for retail investors expires. The holding period is meant to prevent a quick selloff the moment Aramco’s share price rises enough to be turned into a fat profit. Once it expires, six months after the listing, a selloff may still happen.

Meanwhile, some analysts are still wondering how the Kingdom’s oil giant will ease foreign investors’ concerns about transparency and corporate governance risk, considering that Saudi Arabia’s rulers will continue to call the shots. Yet these concerns would only come to the fore if Aramco decides to go through with an international listing, for which it is in no hurry.