Saudi Aramco opts for over-allotment to sell an additional 450 million shares

Saudi Aramco opts for over-allotment to sell an additional 450 million shares
  • Saudi Aramco opts for over allotment to sell an additional 450 million shares.
  • Saudi Aramco's IPO now values $29.4 billion.
  • Rising political tensions in the Middle East had an adverse impact on Aramco's stock.
  • As of Thursday, Saudi Aramco is valued at $1.87 trillion.

As of Sunday, state-owned Saudi Aramco oil company announced that it has opted for over-allotment that puts an additional 450 million of the company shares on sale. With the greenshoe option, Saudi Aramco’s initial public offering (IPO) has now hit the record $29.4 billion.

Saudi Aramco had printed a record $25.6 billion IPO in December. The company had sold 3 billion shares at $8.53 (32 Riyals) per share. Aramco’s representatives, however, had hinted that the company may opt for over-allotment with the start of the new year.

According to Refinitiv data, share prices were seen higher at 35 Riyals immediately after the market open.

Over Allotment Enables Companies To Sell More Shares If Demand Is Higher

The over allotment option that is also widely known as the greenshoe option enables companies to offer a much larger number of shares in its initial public opening if it sees a significantly greater demand than expected. As per Saudi Aramco, the additional shares were allocated to the investors during book-building. The company also commented:

“No additional shares are being offered into the market today and the stabilizing manager will not hold any shares in the company as a result of the exercise of the overallotment option.”

Following the U.S overnight strike on Iran that killed its militia leader, General Qasem Soleimani in Iraq, the rising tension has had an adverse impact on Saudi Aramco in the stock market. The complications stirred volatility in the share prices which were reported trading around 34 Riyals on Wednesday that marked the lowest level for the stock since its IPO on December 11th. As of Thursday, however, the stock was reported to have regained to 35 Riyals.

Saudi Aramco Is Valued At $1.87 Trillion As Of Thursday

Thursday’s stock price of 35 Riyals brands the state-owned oil company with a market value of $1.87 trillion. While the market capitalization represents a value higher than that of the IPO, it is still below the $2 trillion mark that the Saudi Crown Prince Mohammed bin Salman had originally envisioned.

Nonetheless, Saudi Aramco, as per Bloomberg, is currently the largest company by market value across the globe.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.
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