Aramco's IPO grows in size to $29.4bn as 'greenshoe' option exercised

Additional shares are allocated to investors at the initial offer price of 32 riyals per share

Amin H. Nasser, President and CEO of Aramco, attends the official ceremony marking the debut of Saudi Aramco's initial public offering (IPO) on the Riyadh's stock market, in Riyadh, Saudi Arabia, December 11, 2019. Saudi Aramco Website/Handout via REUTERS ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. NO RESALES. NO ARCHIVES.
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The size of Saudi Aramco's record-breaking initial public offering increased on Sunday after the company exercised a 'greenshoe' option to sell a further 450 million shares.

The exercise of the option by stabilising manager Goldman Sachs means the final amount raised via the company's IPO is $29.4 billion (Dh108bn), putting it comfortably ahead of the $25bn that Chinese technology giant Alibaba raised on its debut on the New York Stock Exchange in 2014. It also brings the size of the stake floated by Saudi Aramco up to 1.725 per cent, up from 1.5 per cent previously.

"The 450 million shares subject to the over-allotment option had been allocated to investors during the bookbuilding process and therefore, no additional shares are being offered into the market today," the company explained in a statement to the Saudi Arabian stock exchange, Tadawul, where its shares trade. The shares were allocated at the offer price of 32 Saudi riyals (Dh31.3 per share).

The company's shares closed down 0.57 per cent on Sunday, but remain above its offer price at 34.8 riyals per share, giving it an overall valuation of 6.96 trillion, or about $1.86 trillion.

The over-allotment option could be exercised because the offer for the initial 3 billion shares was 4.65-times oversubscribed. A tranche of 2 billion shares offered to institutional investors was 6.2-times oversubscribed. The company's $12bn debut bond issue in April last year was also 10-times oversubscribed.

Saudi Aramco is the world's most profitable company. In the first nine months of last year, it declared a profit of $68.19bn on revenue of $217.1bn.  The company accounts for one in every eight barrels of crude produced. In 2018, it produced 13.6 million barrels per day of oil equivalent, including 10.3 million bpd of crude.

Funds from the IPO are expected to be diverted to the Public Investment Fund, the kingdom's sovereign fund, which is expected to make investments in projects and initiatives aligned to the Vision 2030 plan aimed at diversifying Saudi Arabia's revenues away from hydrocarbons.

"We expect PIF's investment focus to be mainly domestic, which could help non-oil growth,"Fitch Ratings said in a note issued ahead of the company's listing.