World’s Largest Oil Producer Saudi Aramco Files for an Initial Public Offering

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by Bhushan Akolkar · 3 min read
World’s Largest Oil Producer Saudi Aramco Files for an Initial Public Offering
Photo: Saudi Aramco

The shares of the world’s largest oil producer Saudi Aramco will be traded on the local exchange Tadawul starting December 2019.

Saudi Aramco, the world’s largest and state-owned oil producer of Saudi Arabia, has announced its plans of Initial Public Offering (IPO) on Sunday, November 3. This is likely to be the largest ever initial stock offering with stocks listed on Saudi’s domestic stock exchange, Tadawul.

An unspecified percentage of shares will be available for trading next month as the oil giant plans to raise anywhere between $20-$40 billion. Note that this will be just 1-2% of the stake sale for the company. However, Saudi Aramco has yet to confirm the exact timeframe of listing and other specifications. Aramco’s IPO offering will happen in two tranches separately, for retail and institutional investors.

As on date, Saudi Aramco contributes the maximum to the kingdom’s economy and is the world’s most profitable state-run enterprise. Moreover, some bankers said that Saudi Aramco’s valuations could be around $1.5 trillion making it the most-valued public enterprise in the world. So far, only two public listed companies – Apple and Amazon – have managed to cross the trillion-dollar mark.

The kingdom’s latest decision of going for a public listing of Saudi Aramco comes as its long-term plan of sustained economic growth and diversification. The announcement to go public arrived just within two months of the dread attacks on its oil field in September 2019. As per the experts’ estimates, the attack has temporarily shut down nearly 5% of the global oil supply.

The Valuations Anomaly

Saudi Aramco’s plans of launching an IPO comes three years after Saudi’s Prince Mohammed bin Salman announced it earlier in 2016. Furthermore, he expected the company to be valued at around $2 trillion if the listing would have happened in 2017. Besides, the Prince also proposed international stock listing on exchanges of New York, London, or Hong Kong.

However, the company’s valuations have been subject to fierce speculation owing to several complications of readying its operations and finances.

Banking giant HSBC, which has been involved in the company’s IPO process over the last two years has put its valuation anywhere between $1.59-$2 trillion. Giving a more precise figure, French banking giant BNP Paribas value Aramco at $1.424394 billion. On the other hand, Wall Street giant Goldman Sachs value it anywhere between $1.6 to $2.3 trillion. In one report, the Goldman investors wrote:

“Note that our suggested valuation framework is based on a long-term analysis and it is not linked to a near-term assessment of the likely performance of the company’s shares”.

“It is a colossal public offering that could potentially generate more than 10 years worth of proceeds raised through IPOs in the country,” said Salah Shamma, head of investment, MENA, Franklin Templeton Emerging Markets Equity, speaking to Aljazeera.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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