Oil giant Saudi Aramco has exercised its "over-allotment option" to further increase its record breaking initial public offering (IPO).
Aramco, the state-owned oil company of Saudi Arabia, announced that it has exercised its over-allotment option and issued an additional 450 million shares. This raised the size of its IPO by $3.8 billion to a total of $29.4 billion.
Also known as a "greenshoe option," an over-allotment enables a company to issue a certain percentage of additional shares above what it had initially planned for an IPO. This can serve as a stabilizing mechanism to keep shares from falling below their offering price.
Saudi Aramco launched its IPO in December, offering 3 billion shares, which is around 1.5% of the company. Offer price was at 32 riyals or $8.53 per share, raising $25.6 billion in total.
This made the company the most valuable publicly traded company in the world. A week following the IPO, shares went up by 10% but it fell short of the $2 trillion valuation target set by Crown Prince Mohammed bin Salman.
Majority of the company is owned by the Kingdom of Saudi Arabia and the IPO is part of the Prince's effort to raise funds to diversify the country's economy.
However, the company's shares have fallen in recent weeks, partly due to investors getting worried by potential retaliation by Iran to the US attack that killed its influential general Qasem Soleimani.
The US airstrike ordered by US President Donald Trump at Baghdad International Airport killed Qasem Soleimani, the head of Iran’s Islamic Revolutionary Guards Corps (IRGC) Quds Force unit.
According to the Pentagon, the attack was a “decisive defensive action to protect US personnel abroad” that was intended to deter “future Iranian attack plans.” It also killed Abu Mahdi al-Muhandis, the deputy head of the Iran-backed Iraqi Popular Mobilization Forces (PMF).
After reaching a peak price on December 16, Saudi Aramco stocks have posted a total decline of 10% as of last Monday. This resulted to a decrease of over $200 billion from the company's market value.
However, the share price slightly improved later in the week.
