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Aramco initial public offering (IPO)

Saudi Arabia’s giant state oil company finally kick-started its initial public offering (IPO). It announced its intention to float on the domestic stock exchange in what could be the world’s biggest listing as the kingdom seeks to diversify its economy away from oil. The money raised from IPO will be utilized to diversity into non-oil investments.

Sources have told Reuters the oil company could offer 1%-2% of its shares on the local stock exchange, raising as much as $20 billion-$40 billion. A deal over $25 billion would top the record-breaking one of Chinese e-commerce giant Alibaba in 2014.

Likely valuation of company
Bankers have told the Saudi government that investors will likely value the company at around $1.5 trillion, below the $2 trillion valuation touted by Crown Prince Mohammed bin Salman when he first floated the idea of an IPO nearly four years ago.

At a valuation of $1.5 trillion, Aramco would still be worth at least 50% more than the world’s most valuable listed companies, Microsoft and Apple, which each have a market capitalisation of about $1 trillion.

Aramco accounted for about one in every eight barrels of crude oil produced globally from 2016 to 2018.

Its net income for the third quarter of 2019 amounted to $21.1 billion, far high than the income for the same period of oil giants like Exxon Mobil Corp, which was just over $3 billion.

Source: The Hindu

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