Saudi Aramco has secured its position as the most valuable listed company in history after investor appetite for the world’s biggest fossil fuel producer pushed its market value to $1.9tn (£1.4tn) on its first day of trade.
Shares in the Saudi state-backed oil company defied Aramco’s critics by climbing nearly $200bn above the $1.7tn valuation set before its market debut on Riyadh’s stock exchange.
The world’s biggest contributor to the climate crisis had been valued at more than Apple and Facebook – previously the world’s most valuable and fifth-most valuable companies respectively – combined. It is also twice the size of Amazon and Alphabet, Google’s parent company, and bigger than the next five listed oil companies put together.
The record market listing is expected to keep rising on its second day of trade on the Tadawul stock exchange on Thursday after Aramco’s share price surge was capped at 10% under rules designed to safeguard market stability.
More than 5 million investors have put aside concerns over the company’s close ties to a state associated with human rights abuses, and an uncertain future for the global oil industry, to buy 3bn shares.
The Saudi state has raised $25.6bn through the float, which is regarded as the biggest single injection of capital into the fossil fuel industry, despite growing concerns over the climate crisis and the need to create a sustainable global financial system.
The investor clamour for a stake in Aramco marks the end of a four-year campaign by the crown prince, Mohammed bin Salman, to sell a fraction of the company to help modernise the Saudi economy.
Aramco executives, including the chief executive, Amin Nasser, and the head of the Saudi sovereign wealth fund were showered with gold ticker tape during a ceremony at the Tadawul, as they signed documents on stage after an extended opening auction.
Yasir Othman Al-Rumayyan, Saudi Aramco’s chairman, said: “This is a proud and historic moment for Saudi Aramco and our majority shareholder, the kingdom, as Saudi Aramco begins life as a listed company on Tadawul, together with all our new individual and institutional shareholders here in the kingdom, in the region and around the world.”
The company’s early support, however, has come mainly from investors in Saudi Arabia and the Middle East after plans for an expansive international debut, including a listing on one of the world’s biggest stock exchanges, were scaled back following a series of delays and waning interest from western banks.
But the investment index providers MSCI, S&P Dow Jones and FTSE Russell, which is owned by the London Stock Exchange, have all said they will fast-track the inclusion of Aramco shares into their indices, which would mean investors around the world, including pension funds, would automatically be forced to buy shares.
Major investors in Europe, the Americas and Asia are understood to have balked at the $2tn valuation, whereas Saudi investors and wealthy families have fallen in line with calls from Prince Mohammed to support Aramco’s entry into global financial markets.
Aramco is reportedly considering plans to raise more money by seeking a broader base of international institutional investors through a possible float in Asia.
Jasper Lawler, the head of research at London Capital Group, warned the surging market debut may prove to be the “high-water mark” for Aramco due to growing concerns over the climate crisis.
“Whether enthusiasm holds up longer term will in part rest upon the host nation’s ability to stay relevant for the world’s future energy needs. The oil industry needs to adapt to higher supply from the United States and calls for lower fossil fuel use because of climate change,” he said.
Green groups wrote to the western banks linked to Aramco’s float, including the bosses of HSBC and Goldman Sachs, to warn the listing would hinder the battle against greenhouse gas emissions and human rights abuses.
The groups, including Friends of the Earth US and Oil Change International, said the listing would lead to “the biggest single infusion of capital into the fossil fuel industry” since the Paris climate accord in 2015.
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