Gas & Oil Fired, Middle East, Strategic Development

Saudi Aramco to proceed with IPO, could shatter records

Saudi Arabia is moving forward with an initial public offering of its huge state oil producer that could shatter records and give investors the chance to own a piece of the world’s most profitable company.

The announcement follows approval from the country’s regulators, confirming Saudi Aramco intends to float shares on the Tadawul exchange in Riyadh.

According to CNN Business, Aramco executives will now embark on an international roadshow to court investors, and a prospectus outlining the company’s financial details is expected later this month.

“(The IPO) will increase our international visibility as the leading company in the world,” CEO Amin Nasser said at a press conference. He declined to comment on the company’s valuation, which executives said would be determined following consultation with potential investors.

Aramco has vast oil reserves and massive daily output. It holds a monopoly in Saudi Arabia, the world’s largest exporter of crude oil.

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The public offering is part of Saudi Crown Prince Mohammed bin Salman’s plan to wean his country off oil and develop other areas of the economy. However, getting the massive IPO off the ground has been an arduous process full of false starts.

The Saudi government initially discussed floating 5 per cent of the company in 2018 in a deal that would raise as much as $100bn. It was looking at international markets such as New York or London, as well as Riyadh.

But the project was shelved amid concerns about legal complications in the United States, as well as doubts about the $2 trillion valuation sought by bin Salman — only to be revived earlier this year after Aramco pulled off a successful international bond sale.

Estimates of how much the flotation will raise vary widely. Bin Salman has reportedly pushed to value Aramco at close to $2 trillion; however analysts peg it no higher than $1.5 trillion.

Selling even 1% of the company at the bottom of that range would fetch $15bn, while selling 2 per cent at the top could generate $40bn, eclipsing the record $25bn IPO by Alibaba (BABA) in 2014.

Uncertainty will still hang over the IPO process in the coming weeks. Questions remain about international appetite for Aramco shares, and the company is sensitive to the geopolitical environment. It had to delay the IPO process following attacks on Saudi oil facilities in September.

“The question could be, ‘Why not now?'” chairman Yasir Al-Rumayyan told reporters at the press conference. “I think this is the right time for us — coming to a juncture where we want to take Aramco to be a public company, to have more disclosure.”

Shares could start trading in early December, according to recent media reports.

Story courtesy of CNN Business