Saudi Aramco priced its long-awaited IPO at the high end of the target range on Thursday, raising $25.6 billion and giving the energy giant a valuation of $1.7 trillion in the world’s biggest stock sale.

Aramco priced its initial public offering at 32 riyals ($8.53) per share, surpassing the $25 billion raised by Chinese retail giant Alibaba when it debuted on Wall Street in 2014.

The sale of 1.5 percent of Aramco was oversubscribed 4.65 times, the energy giant said in a statement, but the scaled-down IPO is still a far cry from the blockbuster originally planned by Crown Prince Mohammed bin Salman.

The much-delayed stock sale, first announced in 2016, was initially expected to raise as much as $100 billion from the sale of up to 5 percent of the company.

The IPO is the bedrock of Prince Mohammed’s ambitious strategy to overhaul the oil-reliant economy, by pumping funds into nonenergy industries.

But skeptics say the IPO’s proceeds would barely cover the kingdom’s budget deficit for a year.

The market launch puts the oil behemoth’s value at $1.7 trillion, far ahead of other firms in the trillion-dollar club like Apple Inc. ($1.2 trillion), Microsoft Corp. and Alibaba Group Holding Ltd. ($1.1 trillion).

But it still fell short of the $2 trillion mark that de facto ruler Prince Mohammed was aiming for.

The company is considered the pillar of the kingdom’s economic and social stability and produces about 10 percent of the world’s oil, so investors are betting on a long-term rise in oil prices.

That could be helped by a new agreement to cut production among the 14 member countries of the Organization of the Petroleum Exporting Countries (OPEC) along with other major crude exporters.

OPEC was conducting delicate discussions on Thursday in Vienna, set to continue Friday, regarding the production agreement and any further cuts.

Aramco will begin trading 3 billion shares on the country’s Tadawul stock exchange on Dec. 12 at the starting price of 32 riyals, two sources said.

That price is at the top of the range set last month, even though the banks advising the company called on Saudi authorities to be cautious to avoid volatile price swings in the first days of trading.

The IPO is heavily focused on Saudi and other Gulf traders as international investors have remained skeptical about the secretive company’s targeted valuation, as well as harboring doubts over its transparency and governance practices.

There are also concerns about dipping profitability as Aramco has acknowledged that climate change concerns could reduce demand for hydrocarbons and see global oil demand peak within the next 20 years.

The IPO also comes with oil prices under pressure due to a sluggish global economy hit by the U.S.-China trade war and record output by non-OPEC crude exporters.

But Aramco, a cash cow that turned the kingdom into the Arab world’s biggest economy, appears to hold enormous appeal for local retail investors, some of whom have incurred debts to fund share purchases.

Last week, the company announced that retail subscriptions had been oversubscribed.

The government used a series of initiatives to encourage Saudis to buy a stake in the kingdom’s crown jewel, including offers of easy bank loans and nationalist rhetoric portraying the investment a patriotic duty.

Aramco has also provided local investors with promises of higher dividends, and the opportunity to obtain additional free shares if they hold their initial shares for some time. It pledged to pay $75 billion in dividends in 2020.

Some of the wealthiest families and individuals in Saudi Arabia have reportedly been obliged to invest. They are rumored to include billionaire prince Al-Waleed bin Talal, who was among businessmen locked up in Riyadh’s Ritz-Carlton Hotel during an “anti-corruption” crackdown in 2017.

Aramco’s plan to raise additional funds by selling further shares on a major international market are currently on hold.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.