- Oil, Saudi Arabia: Ipo at the Stock Exchange for Aramco. It will be the most valuable listed company in the world
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03 November 2019Ultra-conservative Saudi Arabia is undergoing a major transformation under Crown Prince Mohammed bin Salman, who intends to end the kingdom's dependence on oil revenues. While the country is opening up on the economic front, there have also been some social reforms, including greater freedom for women, but progress is currently very slow and rather weak. The most ambitious economic initiative of the crown prince has so far been to push the state energy giant Aramco towards a stock exchange debut. After years of delays, the green light was announced today.
Why is the initial public offering so important?
The sale of a part of Aramco forms the basis of Prince Mohammed's transformation plan for Saudi Arabia. The size of the listing remains in the air, but originally it was hoped that it could generate up to 100 billion dollars. This figure, based on a $ 2 trillion valuation of the company now considered unrealistic, may not be achieved, but even so it is likely to be the largest stock market offer of all time. These resources are needed to finance mega projects such as NEOM, a mega-billion-dollar futuristic city planned on the northern coast of the Red Sea, which officials say will have flying taxis and talking robots. Given that at the moment there is no provision for listing on foreign markets, the crown prince will rely mainly on Saudi billionaires to support the offer.
Will it be a success?
As always in these cases, skepticism abounds and attention levels on the Saudi stock market will be at their highest in the coming weeks. According to some analysts interviewed by France Press, if the actions were to decrease drastically after the start of negotiations, it would be a very visible blow to the credibility of the economic reforms so closely associated with Mohammed bin Salman. Not only that, but international investors will pay close attention to how Aramco will behave on the domestic market, especially in the absence of any details on the hypothesis of its international debut.
Why is Aramco so important?
Aramco pumps about 10% of the world's oil from its wells under the desert sands, especially east of the kingdom, but also in the evocative "Empty Quarter" to the south. There are also some important offshore oil fields. Last year the energy giant generated the most important results compared to any high society, with a net profit of 111 billion dollars, to be more meaningful than Apple. Moreover, the destiny of Aramco is fundamental for the global energy supply.
How is mbs rebuilding the economy?
Even before he became the crown prince in June 2017, King Salman's son - often known by his initials MBS - had announced a plan to diversify the economy and remove it from its long dependence on oil. Since then, the kingdom has witnessed a series of initiatives never seen before, mostly related to entertainment and tourism, including vast projects of luxury destinations.
Women have been more involved than in the past in the world of work, concerts have been opened to Saudis, international sporting events have been given the green light and the first tourist visas have been issued. Despite low oil prices, the kingdom has also increased fuel and electricity prices, imposed a 5% value added tax (VAT) and imposed duties on 11 million of export goods in an attempt to generate additional revenue.
Pride and fear for the sale of family jewels
Aramco's IPO has generated a feeling of pride among the Saudis, and many are worried about sharing the "family jewel" with foreigners. Above all, employees live completely immersed in the reality of the company, in a country where cities offer so far few attractions, and the IPO has exposed Aramco to worldwide visibility. They therefore fear a substantial change in the company, and therefore in their lives.