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Saudi Aramco Greenshoe Kicks IPO Up to Record-breaking $29.4 Billion

State-owned oil company Saudi Aramco said on Sunday it raised the size of its initial public offering (IPO) to a record $29.4 billion by way of a so-called “greenshoe option.”

Also known as overallotment, a greenshoe lets a company issue more shares when demand is high during an IPO.

After initial enthusiasm following its December IPO, Aramco shares have been trading relatively flat around the 35-riyal ($9.33) mark. Shares of the oil giant hit a low on Jan. 8 after Iran launched missiles against U.S. bases in Iraq following the killing of an Iranian military commander by an American drone strike.

Visitors stop at the Aramco exhibition Visitors stop at the Aramco exhibition section at an expo in Riyadh, Saudi Arabia, on Nov. 13, 2019. (Fayez Nureldine/AFP via Getty Images)

Aramco began trading at 32 riyals ($8.53) and stands at 34.80 riyals ($9.28) as of this writing, which represents an 8.75 percent increase over the IPO price.

Jason Tuvey, a senior emerging markets economist at Capital Economics, told Reuters that while geopolitical tensions were behind Aramcos dip last week, cooling investor expectations regarding the firms prospects were causing shares to trend down.

Aramco first went public in December, raising $25.6 billion by selling 3 billion shares, setting a world IPO record, valuing the company at $1.7 trillion. Investor enthusiasm quickly pushed Aramco shares higher, with the company cracking the $2 trillion valuation mark briefly, before retreating.

The greenshoe, which released an additional 450 million shares, kicked Aramcos valuation up to around $1.87 trillion.

“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 exercise of the over-allotment option,” Aramco said in a statement.

Oil Prices Spike, Then Topple

Brent crude oil futures, closely tied to supplies from the Middle East, spiked to over $70 per barrel on news of Irans missile strike, before plummeting in hours of trading to $65 per barrel, levels not seen since before the U.S. military strike that killed Iranian Gen. Qassem Soleimani.

Oil prices dipped even further a day later, as investor concerns about military flare-ups in the Middle East eased while attention turned to unexpectedly high American petroleum reserves.

At 431.1 million barrels, U.S. crude oil inventories are at the five-year average for this time of year, according to the Energy Information Administration (EIA). This does not include the U.S. Strategic Petroleum Reserve, which, at an authorized storage capacity of 713.5 million barrels, is the worlds largest supply of emergency crude oil.

U.S. petroleum inventories. (Aaron Sheldrick/Reuters Graphics/EIA/Refinitiv)

David Johnson, founding director of Halo Financial, a foreign exchange company, called the short-lived upward bounce in oil “a pretty straightforward story of perception.”

“The strike caused a spike. It became clear reasonably early on that there was no evidence of loss of life and there were rumors that there hRead More – Source

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