After more than three years of announcement, the state-owned oil producer Saudi Aramco will finally go public. Saudi Arabia’s Capital Market Authority (CMA) on Sunday proposed to move forward with the initial public offering (IPO), and moved a step ahead of making probably the world’s most profitable firm closer to the long-awaited objective of becoming a public-traded enterprise.
The oil producer also proposed its plans to sell an undetermined percentage of its shares on the Saudi stock exchange, Tadawul. However, analysts believe as much as 3 per cent will be listed initially. Besides, no specific date or other details were mentioned, but the trading is expected to begin next month.
Saudi Aramco’s IPO is considered a major initiative to achieve the target of its de facto leader Crown Prince Mohammed bin Salman, who laid the ‘Vision 2030’ plan and end the economic dependency on oil. Consequently, he announced to take the company public, stating that it would be valued around $2 trillion.
Yasir al-Rumayyan, the recently appointed chairman of Aramco, said that the Sunday announcement represented “important progress” towards delivering Saudi’s “blueprint for sustained economic diversification and growth”.
The behemoth in the oil manufacturing business, Aramco produces nearly one-tenth of world’s total crude oil output. It’s net income was estimated to be $111.1 billion in 2018, trouncing the profits of tech-giant Apple ($59.5 billion), as well as the oil producing firms Exxon Mobil ($20.8 billion) and Royal Dutch Shell ($23.9 billion).
Sunday’s announcement brings in what would most probably be the biggest initial public offering of all times, where it may exceed the nearly $22 billion that the Chinese e-commerce giant, Alibaba, raised in one day in 2014.
However, Aramco’s IPO is still expected to fall short of the Kingdom’s objectives. The public offering was expected to take place in 2017 after the announcement, but it came after three years. Besides, there have been several bumps in the way, due to the complications over its finances that have long remained a secret and a scrutiny for investors.
On the other hand, Aramco appears poised to be valued short of $2 trillion. People briefed on the matter highlighted, bankers informed the Saudi government that the investors may value it at around $1.5 trillion.
Moreover, while MbS was eager to have Aramco traded on both the Saudi exchange and a more prominent stock market, it also appears off the table as of now. Although the Kingdom’s goals may fall short, the raises from the flotations are still expected to be massive.