Saudi Aramco's $100-bn IPO to be world's biggest ever
04 Mar 2017
Saudi Arabia is going to break a Chinese investment record. Alibaba Group Holding Ltd, a Chinese Internet retailer, raised $25 billion in 2014, which made it the biggest initial public offer of the world.
Now Saudi Aramco, the state-owned oil company of Saudi Arabia, is preparing for an IPO next year that would beat Alibaba's record.
Oficially the Saudi Arabian Oil Company, it is till referrred to Aramco, the abbreviation for its earlier name, Arabian-American Oil Company.
Saudi Aramco has both the world's largest proven crude oil reserves, estimated at more than 260 billion barrels and largest daily oil production.
Headquartered in Dhahran, Saudi Arabia, Saudi Aramco operates the world's largest single hydrocarbon network, the Master Gas System. Its value has been estimated at anywhere between $1.25 trillion and $10 trillion, making it the world's most valuable company, based on its etimated hydrocarbon reserves.
Here are the key points of the world's biggest market event, as outlined by The Economic Times:
The size: Saudi Arabia is aiming to sell 5 per cent of Saudi Aramco. The share sale would be worth $100 billion, four times the Alibaba IPO. The share sale will value the company at $2 trillion. It will be far bigger than any of the biggest listed companies such as Apple, Berkshire Hathaway, Facebook, ExxonMobil and JPMorgan Chase. It will be bigger than the two biggest listed companies in the world-Apple and Alphabet, Google's holding company-put together.
The listing: Saudi Aramco will list at Saudi Arabia's domestic stock exchange, Tadawul. Since it will be too big for the local exchange alone, it is expected to be listed at one more exchange. This has kicked off a race among global exchanges. Hong Kong, Singapore, New York, Toronto, London and Tokyo are in the race. The company may not list at the New York Stock Exchange even if it wants due to regulations that would require it to declare its oil reserves, which Saudi Arabia considers a state secret.
What will Saudi Arabia do with $100 billion?: For quite some time, Saudi Arabia has been trying to diversify its economy to reduce dependence on oil. The money raised from the Saudi Aramco IPO will go into a public investment fund which aims at diversifying the economy. The money will drive a plan called Vision 2030, which calls for development of non-oil industries and broad-basing investment.
Will it impact oil prices?: Yes, it might, as Saudi Arabia would like the oil prices to go up for higher valuation. Higher oil prices will raise the price of Aramco shares.