Saudi Aramco shares gain 10% in pre-market auction

Saudi Arabia to Spend ‘a Lot’ of Its Aramco IPO Proceeds Locally

Saudi Arabia's government itself sank almost US$2.3 billion in the record-beating initial public offering of the Kingdom's oil giant Aramco, according to one of the lead managers of the deal, which was aimed at attracting fresh funds into the Saudi economic diversification.

The Saudi Public Pension Agency was allocated shares which equal 11.5 percent of the institutional tranche of the IPO, al-Khatib told Al Arabiya.

Aramco has priced its IPO at 32 riyals ($8.53) per share, the high end of the target range, surpassing the $25 billion raised by Chinese retail giant Alibaba in its 2014 Wall Street debut.

Saudi Aramco sold a 1.5 per cent stake in the IPO, while the remainder stays in the hands of the Saudi state.

The sale of Aramco shares is the bedrock of de facto ruler Crown Prince Mohammed bin Salman's ambitious strategy to overhaul the oil-reliant economy.

Saudi Aramco executives, including the chief executive, Amin Nasser, and the head of the Saudi sovereign wealth fund, were showered with gold ticker tape in a ceremony at the Tadawul, the Saudi stock exchange in Riyadh, as they signed documents on stage after an extended opening auction.

The market launch puts the oil behemoth's value at $1.7 trillion, far ahead of other firms in the trillion-dollar club, including Apple and Microsoft.

But the scaled-down listing is still a far cry from the blockbuster originally planned by Prince Mohammed.

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The flotation, a major challenge for the Riyadh stock exchange, propels the bourse into the world's top 10 by value of listed companies.

The government's plans to raise additional funds by listing on a major global market are also on hold.

Saudi Arabia relied on mainly domestic and regional investors to buy Aramco shares after lukewarm interest from overseas.

The government sold two thirds of the shares offered in the company to institutional investors, of which 13.2 per cent came from Saudi government institutions, according to a statement from Samba Capital, one of the lead managers on the deal.

Saudi Arabia's finance minister recently said that reinvesting money from the IPO of oil group Saudi Aramco would help to create more revenue channels for the government.

But sceptics say the proceeds will barely cover the kingdom " s budget deficit for a year.

Most actively managed funds said they would likely steer clear of the IPO, citing concerns about governance, the environment and regional geopolitics, according to information provided to Reuters by 26 major asset managers outside the Gulf region. After worldwide investors balked at Aramco's valuation expectations, the kingdom instead focused on raising money domestically.

Its debut comes as oil prices are being supported by a Saudi-orchestrated move by the Organization of the Petroleum Exporting Countries (OPEC) and oil-producing allies to commit to some of the industry's deepest output cuts in a decade to try to avert oversupply.

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