It has been over three years since Saudi Arabia’s Crown Prince Mohammed bin Salman promised to sell shares of Aramco, the petroleum and gas company considered to be the most profitable in the world.
Amidst fears of even further delays caused by recent drone strikes, the state-run company has announced that it will move forward with plans to sell 1 – 2% of its shares on the country’s domestic stock exchange.
“The official prospectus is set to be released on October 25th, and speculators around the world believe that the IPO could make history as the largest ever,” said Matthew Barrett, Director of Corporate Equities at Saitama Rakuten International.
Bin Salman himself has valued the company at US$2 trillion, but even with the more modest US$1.5 trillion valuation of more conservative executives, the offering would still shatter records. Analysts from Saitama Rakuten International believe that Aramco could raise more than US$40 billion – significantly topping Alibaba’s US$25 billion that made it the largest IPO in 2014.
The company plans to roll out a two-part offering, with 1 – 2% of its shares being offered on the Tadawul, Riyadh’s domestic stock exchange, during the first stage. The next phase would consist of selling 5% of shares on the international market, but the timing for that is currently left only to speculation.
Despite the sheer size of the upcoming IPO, concerns are plentiful among potential investors worldwide. Both the oil market and the global economy have been slowing down, and there is much uncertainty when it comes to the future. Additionally, investors are worried about the recent drone strikes on Aramco’s largest plant, fearing that more attacks may be on the way.
“From a broader perspective, investing in oil may not be as lucrative as it once was. Aramco established dominance in a period when oil sales were essentially a given, with auto manufacturing and utilisation consistently on the rise,” said Nicholas Cooke, Head of Corporate Trading at Saitama Rakuten International.
The Aramco IPO will undoubtedly raise an enormous amount of capital, and prospects look good for the immediate future. However, there are many concerns about the company’s long-term sustainability, and it remains to be seen whether this will be as successful as Saudi Arabia believes it will.
Read the article online at: https://www.hydrocarbonengineering.com/special-reports/11102019/aramco-ipo-could-break-records/
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