Saudi Aramco prices shares at top of range in world's biggest IPO: sources

State-owned oil giant Saudi Aramco has priced its initial public offering (IPO) at the top of its indicative range, three sources told Reuters, raising $25.6 billion and overtaking China's Alibaba to achieve the world's biggest stock market flotation.

Saudi Arabia relied on domestic and regional investors to sell a 1.5% stake after lukewarm interest from abroad, even at the reduced valuation of $1.7 trillion.

That was below the $2 trillion target initially sought by Crown Prince Mohammed bin Salman.

Saudi Aramco's shares have been priced at 32 riyals ($8.53) each against an earlier indicative price range of 30-32 riyals per share, the sources said.

At that price, Aramco's IPO of 3 billion shares will just beat the $25 billion raised by Chinese tech giant Alibaba (BABA.N) in 2014.

Sources told Reuters earlier that Aramco may also exercise a 15% "greenshoe" option, allowing it to increase the size of the deal to a maximum of $29.4 billion.

Aramco has declined to comment on the pricing of the deal.

A formal announcement is expected later on Thursday, the sources said.

Aramco's market valuation of $1.7 trillion will comfortably overtake Apple (AAPL.O) as the world's most valuable listed firm. But the listing, expected later this month on the Riyadh stock exchange is a far cry from the blockbuster debut originally envisaged by the Crown Prince.

Climate change concerns, political risk and a lack of corporate transparency put foreign investors off the offering, forcing the kingdom to ditch ambitions to raise as much as $100 billion via an international and domestic listing of a 5% stake.

Even at a $1.7 trillion valuation, international institutions baulked, prompting Aramco to scrap roadshows in New York and London and focus instead on marketing a 1.5% stake to Saudi investors and wealthy Gulf Arab allies. Saudi banks had offered citizens cheap credit to bid.

Riyadh has gone quiet on when or where Aramco could list abroad.