It’s Official, Saudi Aramco Set To Rival Alibaba With IPO: 10 Things To Know

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Fund-raising of more than $25 billion would put Aramco ahead of Alibaba Group Holding, whose public offering in 2014 is so far the world’s largest.

Saudi Arabia’s state oil company Aramco or Saudi Arabian Oil Co on Sunday announced its intention to go ahead with an IPO in the Tadawul stock exchange in Riyadh. With the Aramco IPO, the government of Saudi Arabia will sell a portion of its existing shares in the company. The statement from the company followed a go-ahead from the Saudi market regulator – the Capital Market Authority – on the same day, which would remain valid for six months. The much-awaited announcement by the world’s most profitable company – Saudi Aramco – comes within two months of the attacks on its largest plant which affected about 5 per cent of the world’s oil supply. Saudi Aramco accounts for 10 per cent of the supply of oil in the world.

Here are 10 things to know about Saudi Aramco and its upcoming IPO:
  1. Saudi Aramco IPO Issue Price: The issue price – or the price range in which potential investors will be able to bid for shares – as well as the percentage of shares to be sold under the IPO “will be determined at the end of the book-building period”, the oil major said in its statement.
  2. Company Profile: Saudi Aramco is the world’s largest integrated oil and gas company. As of December 31, 2018, the oil giant accounted for approximately five times the proved liquids reserves of five super majors — Exxon Mobil, Royal Dutch/Shell, BP, Chevron and Total. Aramco’s upstream operations are based in Saudi Arabia and its business includes global downstream operations. (Also read: Key facts about Aramco)
  3. Financials: Aramco’s net profit stood at $111.1 billion in 2018 — higher than the profits of Apple, Google and Exxon Mobil combined. For the six months ended June 30, 2019, the oil major generated 196.7 billion Saudi riyals ($52.5 billion) in net cash provided by operating activities, and 142.4 billion Saudi riyals ($38.0 billion) of free cash flow.
  4. Aramco IPO Size: Saudi Aramco could sell 1-2 per cent of its shares on the local bourse, raising as much $20 billion-$40 billion, news agency Reuters reported citing sources. Fund-raising of more than $25 billion would put Aramco ahead of China’s Alibaba Group Holding, whose public offering in 2014 is so far the world’s largest.
  5. Saudi Aramco said its strengths include its ability to execute some of the world’s largest upstream and downstream capital projects in the oil, gas and petrochemical industries. Aramco said it executed 22 projects with capital expenditures of more than 1.9 billion Saudi riyals ($500 million) each from 2014 to 2018.
  6. Saudi Arabia – whose dependency on oil was highlighted by the production impact of the September 14 attacks – seeks to diversify and create the world’s most valuable listed company. It is relying on easy credit for retail investors and hefty contributions from rich locals to make the Aramco IPO a success. Saudi Aramco has said that any disruption to its processing facilities could harm its business. (Also read: Saudi Arabia restores full oil production)
  7. Aramco had initially been expected to sell a total of five per cent on two exchanges, with a first listing of two per cent on the Tadawul bourse followed by a three per cent listing on an overseas exchange.
  8. In its November 3 statement, without mentioning a foreign listing, Aramco said the Riyadh offering was open to institutional investors, Saudi individuals, foreigners resident in the kingdom and other Gulf citizens.
  9. Although Crown Prince Mohammed bin Salman put a $2-trillion valuation on the company in early 2016, bankers and company insiders say Aramco’s value is closer to $1.5 trillion, according to Reuters. At a market value of $1.5 trillion, Aramco would still be worth at least 50 per cent more than the world’s most valuable companies — Microsoft and Apple.
  10. Saudi Arabia has announced an annual dividend of $75 billion, according to its website.

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