Aramco, one of the worlds biggest initial public offering’s (IPO’s) in history and considered to be more valuable than Apple, Amazon and Facebook combined is finally making the big move to go public soon.
Saudi oil giant Aramco, one of the most profitable companies in the world, will be offering up shares to the public on the Tadawul exchange in Riyadh on 4 Dec, 2019. In 2018, its net profit was higher than that of Apple, Amazon and its American rival Exxon Mobil combined!
The oil giant will be selling 1.5% in stock, at a price of $8.10 (Ugx. 29,639) to $8.64 (Ugx. 32,011) per share, hoping to raise as much as $25.6 billion, giving it a potential market value of between $1.6 to $1.7 trillion.
The book building process for allocating shares to institutional buyers – typically asset managers, insurers or pension funds – began on Nov. 17 and investors have until Dec. 4 to place orders. However, based on reports by one of the trading gaints eToro, the company could hit a market cup of up to $2 trillion once it goes public.
According to Reuters, institutional investors have put in over 144.1 billion riyals ($38.4 billion) worth of bids for Saudi Aramco’s planned initial public offering which is equivalent to more than twice the number of shares on sale, financial advisers for the IPO said on Monday.
Despite the enormous bids placed on the IPO, it has received less media attention compared to other famous IPOs that went public before like the top Saudi bank in 2014 that was oversubscribed many times over including China’s Alibaba in 2014 which gained $25 billion when it listed.
Aramco also stated that 0.5% of the offering will be allocated to retail investors, leaving 1% – or 2 billion shares – for institutional buyers. More details regarding the company’s IPO listing can be found via their site here.
Aramco could make world history if it hits $38 billion.
Saudi Aramco, officially the Saudi Arabian Oil Company, is a national petroleum and natural gas company based in Dhahran, Saudi Arabia. It is one of the largest companies in the world by revenue and most profitable according to accounts seen by Bloomberg News.
The company also has both the world’s second-largest crude oil reserves, at more than 270 billion barrels and second-largest daily oil production so far with Ghawar Field (worlds largest onshore oil field) and Safaniya Field (world’s largest offshore oil field) as their biggest production lines.
However, in September 2019, the company faced a set back when two of its oil processing plants were hit in a drone attack which the Houthi rebels claimed responsibility for, causing Aramco to cut 5.7 million barrels per day of crude output, over 5 percent of the world’s supply.
The attack affected the oil giant greatly with reports of discussions regarding the Saudi Arabian officials postponing Aramco’s IPO because the attacks “sidelined more than half of the kingdom’s output” of oil.
None the less, this hasn’t stopped the company from pushing forward and are looking to their biggest initial public offering in history.
A few days ago, Saudi Arabia was planning to use its position at the head of the Opec oil cartel to buoy global oil prices before the $25bn stock market debut of its state-owned oil giant.
According to reports by The Guardian, being the fact that Saudi Arabia is Opec’s de facto leader, it is expected to use its position to push other members to tighten their compliance with the group’s agreed oil production limits, while cutting its own output even further than it needs to.
Aramco was expected to announce the initial price of its shares from Riyadh on the same day that Opec talks were to take place in Vienna.
Riyadh however, has scaled back its original IPO plans and has remained quiet on when or where it might list the stock abroad.
The deal is the centerpiece of Crown Prince Mohammed bin Salman’s plans to diversify the Saudi economy away from oil.
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Author: Allan Bangirana
Allan Bangirana has a taste for all kinds of topics and usually writes about tech, entertainment, sports and community projects that make a difference in society.