Saudi Aramco shares surged the maximum permitted 10% above their IPO price on their Riyadh stock market debut on Wednesday, closing in on the $2 trillion valuation long sought by Saudi Crown Prince Mohammed bin Salman.
The shares leapt to 35.2 riyal ($9.39) each, up from the initial public offering (IPO) price of 32 riyals and at the daily limit of price moves allowed by the Tadawul exchange.
That gives the state-owned oil giant a market value of about $1.88 trillion, comfortably making it the world's most valuable listed company, although it will have one of the smallest "free floats" of publicly tradeable shares, at just 1.5%.
The market value is more than six times that of U.S. oil major Exxon Mobil Corp; more than twice the size of Saudi Arabia's annual gross domestic product; and far ahead of U.S. tech giant Apple's market value of about $1.2 trillion.
Saudi Arabian Oil Co (Aramco) raised a record $25.6 billion in its IPO last week, the culmination of a years-long effort by the Crown Prince to open up the energy giant to outside investors and raise funds to help diversify the economy away from oil.
The flotation, a major challenge for the Riyadh stock exchange, propels the bourse into the world's top 10 by value of listed companies.
But Saudi Arabia relied on mainly domestic and regional investors to buy Aramco shares after lukewarm interest from abroad.
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"This is a successful IPO and the Aramco listing will add depth to the local market by providing exposure to a vital sector of Saudi Arabia's economy," said Bassel Khatoun, managing director, frontier and MENA at Franklin Templeton Emerging Markets Equity.
"We are hopeful that Saudi Aramco uses the Tadawul listing as a springboard to an eventual international listing."
Finance Minister Mohammed al-Jadaan told Reuters the bulk of the IPO proceeds would be used on domestic projects, while the global buzz around the listing would help attract foreign capital into the Saudi economy.
Aramco shares began trading half an hour after the market open as the bourse allowed extra time for investors to place bids in the "opening auction" in anticipation of high demand.
Aramco chairman Yasir al-Rumayyan and Tadawul's top executives rang the bell to start trading. Within the first hour, 766.8 million shares had changed hands, more than for any other Riyadh listed stock.
"It's a great day for Saudi Arabia and the leadership of Saudi Arabia and for the people of Saudi Arabia. It's a D-Day for Aramco, it's a day of reckoning and vindication," Energy Minister Prince Abdulaziz bin Salman told Reuters in Madrid.
Salman said last week that Aramco was worth well over $1.7 trillion and predicted investors who didn't buy into the IPO would be "chewing their thumbs" after missing out.
Aramco stock will become part of Tadawul index by next week and global benchmarks such as MSCI and FTSE later this month, which analysts said should fuel demand, particularly from investors who track such indexes.
The Saudi index was up 0.9% in early trade.
Saudi retail investors who hold their Aramco shares for six months from the first day of trading can get up to 100 bonus shares, or one for every 10 held, which could limit supply of the stock, said Zachary Cefaratti, CEO of Dalma Capital.
Aramco will have the second biggest weighting on the Tadawul index of 9.7%, according to Al Rajhi Capital. Al Rajhi Bank has the biggest weighting at 14.6% due to its larger free float.
Earlier this month, Tadawul introduced an index weighting cap of 15% to address concerns about the potential impact of Aramco's flotation and limit the index's correlation to the oil price.
Aramco's debut comes as oil prices are being supported by a Saudi-orchestrated move by OPEC and oil producing allies to commit to some of the industry's deepest output cuts in a decade to try to avert oversupply.
But Riyadh scaled back its global ambitions by only listing Aramco on the Tadawul and cancelling roadshows in New York and London due to muted interest from foreign investors.
Most foreign actively managed funds told Reuters they would likely steer clear of the IPO, citing concerns about governance, the environment and regional tensions, particularly after drone attacks on major Saudi facilities in September.
If Aramco shares gain 10% on both Wednesday and Thursday, it will exceed the $2 trillion valuation coveted by Prince Mohammed. The company is expected to be included in the MSCI emerging markets index on Dec. 17.
Aramco has not named its investors during the IPO process, but sources familiar with the matter have told Reuters the Abu Dhabi Investment Authority (ADIA) and Kuwait Investment Authority (KIA) were among Gulf sovereign funds to buy shares.