The Saudi Aramco IPO started strong last week and has continued to grow stronger but it still falls short of the $2 trillion goal that it set for itself.
The stock is currently trading only on the Riyadh stock market and has reached a value of 36.8 riyals. This is an increase by 4.6 percent. Aramco has already traded 418 million shares, which puts it at $1.96 trillion in value.
The latest value is the result of a 10 percent jump in trades, with 31.6 million shares being traded in a single day. It is a pretty successful result considering the obstacles in the way of trading. This is mostly because of a lack of international interest due to the fact that foreign investors found the IPO price a little too high for their liking.
The Saudi government decided to help out the Aramco IPO by encouraging domestic investment. Considering Saudi Arabia has some of the richest people in the world, the target goal of $2 trillion is still achievable. The government helped by stepping in and offering cheap loans and a bonus-share plan to allow more domestic investors to buy.
However, the IPO only had 1.5 percent of Aramco stock available. This meant that those who did not reserve shares had to go on the secondary market to buy. Still, the performance is very encouraging.
In a statement, Vijay Valecha, chief investment officer at Century Financial Consultancy LLC, said
We were expecting this IPO to be a blockbuster, and the performance in the past two days shows that was the case. From the appetite we see for the stock, there is room for it to climb another 10% to 18% next week
Changing Saudi Arabia
Saudi Aramco is the world’s biggest oil producer and has been a major force behind the Saudi economy for years. But Crown Prince Mohammed bin Salman has a vision for the future and it is not based solely on oil. He plans to use the money gained from the IPO to reshape the economy of the country.
The problem is that many stock experts continue to agree that the current price for the stock is too high. Wall Street analysts initially said that the end of the first day of trading was the time to dump the stock as the price would have peaked.
Saudi officials will be happy given the way the stock as performed. However, it seems that it might make it difficult for the Aramco shares to be sold abroad because of the higher price. Still, some financial experts predict that the share value will grow two percent annually, with a $20 billion payout scheduled in the next three years.