After years of delay, Saudi Aramco, the world's largest oil producer and the most profitable in the sector, has announced its intention to go ahead with the IPO.
But the company still has an important obstacle to overcome, and needs to be clarified in order to make this process a success, namely deciding on the issue of its financial value, says writer Svetana Paraskova in an article published by the American website "Oil Price" specialized in energy.
IPO
The writer states that Saudi Aramco will publish this week its announcement regarding the initial public offering (IPO) on November 9th, which will take place on the Saudi Stock Exchange (Tadawul) at an unspecified time in December.
Paraskova considers the intention to go public with Aramco as an important step for the company and the Saudi leadership, after years of delays with the largest IPO in history, which still faces other obstacles.
The writer explained that what was not clarified in the announcement issued by the company is the size of the part that Saudi Arabia will put from this company in the local capital market, and the amount of income that you expect to reap.
It pointed out that the company's announcement that the price at which investors will buy shares, which is the price of the final offer along with the number of shares to be sold and the proportion of the entire company will be determined during the next period.
She also cautioned that this process, although it will be the largest of its kind, the actual value of the global oil giant - which produces daily one of every eight barrels in the world - is still uncertain.
| Aramco's IPO is important plan for Saudi leadership (Reuters) |
Determine the financial value
The sticking point that has caused all these delays in recent years relates to a more complex subject than the international circumstances surrounding the process and the decline in oil prices, namely the amounts of money that are expected to be gained from the listing process.
The writer pointed out that the Saudis consider that the value of Aramco up to two trillion dollars, but the banks that follow this file provide estimates far from these figures, as it considers that the value of the company is about $ 1.5 trillion or even less if the Kingdom intends to achieve success in attracting Foreign investors, but so far, Mohammed bin Salman and these banks are still sticking to their positions.
She explained that some reports of economic experts pointed out that Saudi Arabia intends through this process to make up to $ 60 billion, in exchange for offering only 3% of the shares in the local financial market.
This figure could mean that the total value of the company will actually reach $ 2 trillion, a goal that Saudi Crown Prince Mohammed bin Salman has been promoting since he first announced his intention to list some of the shares of Saudi Aramco, the jewel of the Saudi crown, in order to obtain the necessary funding. Of the economic reforms he intends to undertake, in part to diversify the Saudi economy away from oil.
| A disagreement over Aramco's aggregate value was the reason for the IPO delay for several years. |
Estimates vary
Last week, Aramco executives visited several countries to convince investors that the value of the company was already around $ 2 trillion, but international banks involved in the offering put the value at $ 1.5 trillion or less, according to Bloomberg. Last Sunday, citing reports sent by these banks to potential investors.
Banks' estimates are clearly mixed, the Bank of America said, for example, considering the value of the company to be between $ 1.22 and $ 2.27 trillion, a margin of difference of $ 1 trillion.
But economic analysts say a realistic look at Aramco's value makes it between 1.2 and 1.5 trillion, and it seems that Saudi Crown Prince Mohammed bin Salman will eventually have to accept lowering his expectations.
People close to the IPO managed to persuade Mohammed bin Salman to cut his forecast to $ 1.75 trillion in the past few days, the writer said, adding that the success of the IPO would itself be more important than the $ 2 trillion he wanted. .
Now that the Saudis are ready to settle, banks will seek to make the company worth between $ 1.6 and $ 1.8 trillion, Bloomberg reported.
In conclusion, Paraskova said that given the current foreign investors' concerns about the way Aramco manages and the state's intervention to dictate the company's policy and level of production, the success of the IPO actually seems more important than raising billions of additional dollars for the Saudi Public Investment Fund to implement the ambitious reforms of the crown prince.