Saudi Aramco announces plans for giant stock market debut – Business

Aramco said Sunday that it will be listed on the Riyadh stock exchange in what could be the largest initial public offering (IPO) in the world, underpinning the ambitions of the crown prince of Saudi Arabia, Mohammed bin Salman, to reform the economy dependent on the Kingdom oil

After years of delays, Aramco finally fired the initial weapon in the stock market debut, saying it was a "significant milestone" in the history of the energy giant that pumps 10 percent of the world's oil.

With analysts saying that Aramco could be valued at up to $ 1.7 trillion, the IPO could be the largest in the world, depending on the amount of the company that decides to sell.

"Today marks an important milestone in the company's history and significant progress towards the delivery of Saudi Vision 2030, the kingdom's plan for sustained economic diversification and growth," said Aramco president Yasir al-Rumayyan.

"Since its formation, Saudi Aramco has become critical for the world's energy supply," he said in a statement.

The final offer price and the number of shares to be sold "will be determined at the end of the book creation period," said the firm, based in the eastern city of Dhahran.

Initially, Aramco was expected to sell a total of five percent on two exchanges, with a first quote of two percent on the Tadawul Saudi stock exchange followed by a three percent quote on a foreign exchange.

The company did not mention a foreign quote on Sunday, but said that Riyadh's offer was open to institutional investors, as well as Saudi people, foreigners residing in the kingdom and other Gulf citizens.

The most profitable company in the world also released its results for the nine months to September, saying that net profits reached $ 68 billion. Aramco only began publishing provisional financial results recently.

Its net profit of $ 111.1 billion in 2018 is greater than the benefits of Apple, Google and Exxon Mobil combined.

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The list forms the key piece of Prince Mohammed's ambitious plans to reform the oil-dependent economy, with tens of billions of dollars needed to finance megaprojects and new industries.

Suggested for the first time by the de facto ruler of the kingdom in 2016, the OPV was delayed several times, according to reports, due to its dissatisfaction with the valuation of the company, which did not reach the expected $ 2 billion.

Last week, Energy Intelligence quoted sources as saying they expect the Saudis to adjust to a valuation of $ 1.6 billion to $ 1.7 billion for the company.

If confirmed, that would imply that the kingdom is ready to accept a commitment of less than the $ 2 billion that Prince Mohammed has long insisted on being worth the state oil giant.

It remains to be seen whether the Saudi authorities can find "a compromise between the declared preference of the crown prince and the realities of the market in their assessment of Aramco," said Kristian Ulrichsen, a member of the Baker Institute at Rice University in the United States.

"As the process has been repeatedly delayed and has become an integral component of the crown prince's plan to transform Saudi Arabia, international investors will pay close attention to how Aramco performs in the national exchange," Ulrichsen said. AFP.

Aramco, which pumps about 10 percent of the world's oil, is the most profitable company worldwide and is seen as the jewel in the crown of the kingdom and the backbone of its economic and social stability.

Saudi Arabia has boosted efforts to attract investors to the long-awaited stock market debut by announcing an annual dividend of $ 75 billion, according to the company's website.

Riyadh is reportedly also trying to get wealthy Saudi families to buy a stake in the company, while some Saudi commentators have tried to promote investment in the shares as a patriotic duty.

However, Aramco executives have met with skepticism among institutional investors in London and New York about questions about transparency, governance practices and the specific valuation of the company, sources said. AFP.

"An important function of the national IPO is to project confidence in the company towards the international market, but doing so at the national level does not find any significant obstacle, comparable to making an international list," said Cinzia Bianco, a Gulf researcher at the European Council Foreign Affairs Relations.

"It allows Prince Mohammed to prove that he keeps his promises and does things, another step to reassure international investors that the IPO will happen after all," Bianco said.