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03 November 2019

Saudi Arabia launches an initial public offering (IPO) of its oil giant Aramco, under which part of the company's shares will arrive on the national stock market. The Capital Market Authority (CMA) of the kingdom explained that it "issued its resolution approving the request of the Saudi oil company to register and offer part of its shares".

According to Al Arabiya, Saudi Aramco aims to list a total of 5% of the capital to raise 100 billion dollars, based on an estimate estimated at 2 trillion dollars. The company should market 1% of the Tadawul stock market in Riyadh before the end of 2019 and another 1% in 2020. The forecast is then for the launch of an international offer in 2020 or 2021. Also according to sources of the Saudi television station the IPO prospectus will be published on November 10th.

Aramco will be the most valuable listed company in the world. It is the world's largest oil producer, pumping 10% of the world supply. Weaker oil prices have reduced the company's net profit by 12%, bringing it this year to 46.9 billion dollars, but the figures have still overshadowed Apple, the most profitable listed company in the world, which has made $ 31.5 billion.

Last year, Aramco achieved a net annual profit of 111 billion dollars, over a third more than the combined net income of the five super majors Exxon Mobil, Royal Dutch / Shell, BP, Chevron and Total. To diversify its oil business, Aramco is expanding into refining and petrochemicals with the goal of tripling its chemical production to 34 million tons per year by 2030 and increasing its global refining capacity to 8-10 million barrels per day (bpd) of over 5 million bpd.

Regarding the evaluation of Aramco, the Saudi authorities must find "a compromise between the declared preference of the crown prince and the realities of the market," said Kristian Ulrichsen, a researcher at the Baker Institute of Rice University in the United States. "Because the process has been delayed several times and is an integral part of the crown prince's plan to transform Saudi Arabia, international investors will be very attentive to Aramco's performance in the domestic (financial) market, "Ulrichsen told AFP. Ryad also tries to encourage rich Saudi families to buy shares in the company, while some Saudi commentators have tried to present this investment as a patriotic duty.

"An important function of the IPO in the local stock exchange is to project the company's trust in the international market," said Cinzia Bianco, a researcher at the European Council on Foreign Relations, at the AFP. "This allows Prince Mohammed to show that he is keeping his promises and doing what he has to do, a new step to reassure international investors that the IPO will take place after all," White added.