The world’s most lucrative company, Aramco, has confirmed that the company will be IPO and its shares will be registered on the Riyadh Stock Exchange.
It may be the world’s largest IPO, the initial public offering.
The Saudi oil company said on Sunday that it planned to be listed on the Riyadh Stock Exchange.
The company is a state-owned company in Saudi Arabia and will decide the initial or launch price of the IPO according to the investors’ registration and their interests.
Business sources believe that one or two percent of the company’s existing shares may be offered in the market.
Aramco is said to be worth US $ 1.3 trillion ($ 927 billion).
The company said it currently has no plans to be listed on a foreign stock exchange.
Aramco Board Chairman Yasser Elmiyan said at a press conference: ‘We will tell you about entering the international stock market in the coming days.’
The history of Saudi Aramco began in 1933 when a contract was signed between Saudi Arabia and the Standard Oil Company of California (Chevron).
The deal was related to the formation of a new company for the exploration of oil reserves and excavation of wells. Then between 1973 and 1980, Saudi Arabia gradually acquired the company.
Saudi Arabia has the largest oil reserves after Venezuela, according to the Energy Information Administration. With this, Saudi Arabia ranks second in oil production after the United States.
In terms of oil, Saudi Arabia has priority over other countries, because extracting oil here is relatively cheap.
David Hunter, director of market studies at energy management company Shander Electric, says that Aramco is certainly the world’s largest ‘quoted’ company.
Shander said: ‘This is bigger than all other oil and gas companies.’
Apple’s revenue in 2018 was $ 59.5 billion if you compare it with some of the world’s largest companies. In addition, other oil companies like Royal Dutch Shell and Exxon Mobil are far behind in the race.
It is the world’s largest oil company, producing 10 million barrels per day and generating revenues of US $ 356,000 million.
Risks and Challenges
Investing in Aramco has its own risks, says Chris Beauchamp, chief market analyst at IG Group. The company also has strategic and political risks.
The threats surfaced in September this year when two Aramco plants were attacked. In Saudi Arabia, two company plants were attacked by a drone which caused them to fire and caused a lot of damage.
However, the chief executive of the company, Amin Nasir, described the company’s plans as ‘historic’. He said that Aramco is still the most trusted oil company in the world.
On the eve of the IPO announcement, Aramco said the recent attacks had no effect on its business, financial condition and operations.
Middle East affairs expert Qamar Agha told the NP: ‘US and European investors are not ready to take risks yet due to economic slowdown and the absence of money in the market. Investors are also skeptical of Saudi Arabia’s role in the ongoing war in Yemen. ”
The Saudi-led coalition has fought against Yemeni rebels for nearly four years. Houthi rebels also claimed responsibility for the attack on Saudi oil plants in September.
According to Qamar Agha, one of the key questions is how many children are in oil reserves in Saudi Arabia as the day is declining. Secondly, Saudi Arabia’s domestic market also has substantial consumption.
NP business to local representatives of Katy Prescott analysis
There was a time when Aramco was considered a mysterious company, but in the past few years it has completely transformed itself. It has carefully prepared itself for where the company has arrived today.
In the past few years, Aramco has begun publishing its financial data. The company now organizes regular question-and-answer programs with journalists as well. Not only this, Aramco also took journalists to the site of the drone strike. The company has appointed Western women to some of the highest positions.
The company says it aims to recycle crude oil for a long time. Proving the responsibility for the environment, Aramco has said it will reduce the damage to the environment by using advanced technology.
The company has said that locals, even divorced women, will be able to buy their shares and will be given a bonus for every 10 shares they buy.
Aramco: Why is the plan to sell shares controversial?
Saudi Arabia wants to sell shares of Aramco because it wants to reduce its dependence on oil.
Prince Mohammed bin Salman wants to take the country’s economy into various fields through his vision ‘2030’.
According to David Hunter, Saudi Arabia also wants to advance solar energy production through its wide desert use.
“At present, the situation is politically complicated for Aramco,” says Hunter. The biggest reason for this is the killing of Saudi Arabian journalist Jamal Khashkaji last year. Saudi Arabia’s record on human rights is not good. Therefore, doubts are also raised about it. ‘
Another difficulty may be in Mohammed bin Salman’s plan that a campaign against fossil fuels is currently taking place around the world.
David Hunter says Aramco may be more difficult for investors as fossil fuels are diminishing and investors are looking for new alternatives.
Qamar Agha believes that Aramco has many positive aspects but will have to wait to see how many investors he can attract. Aga says if the company fails to attract investors, the biggest impact will be on the company itself and Saudi Arabia.