Political Uncertainty Looms over Saudi Aramco: IPO Value Reaches $1.7 Trillion

Political Uncertainty Looms over Saudi Aramco: IPO Value Reaches $1.7 Trillion 

Last updated on July 31st, 2020

Saudi Arabia state-owned oil firm, Saudi Aramco will be valued at $1.7 trillion, the firm stated on November 17. The drop in value is significantly due to the political uncertainty hanging over the firm.

In a press statement made yesterday, Saudi Aramco announced plans to sale a stake of almost 1.5% in the company, that is 3 billion shares. As per Reuters, the price range listed for the shares is 30 Saudi riyals ($8.00) to 32 riyals, that puts up the initial public offering (IPO) at 96 billion riyals ($25.60 billion) at the top of the range.

The highlighted figures clearly state the worth of Saudi Aramco between $1.6 trillion to $1.7 trillion. Analysts claim that the IPO planned in December would break the previous record set by China’s e-commerce firm Alibaba when it debuted in New York in 2014.

Saudi Aramco has claimed to sell up to 0.5 percent of its shares to individual investors. The delay in announcements have led to speculations on the public listing that the world’s most profitable company has fixated investors and market watchers ever since float plans were disclosed three years ago.

Previously, Saudi Aramco has delayed the initial public offering, that was supposed to happen in 2018, mainly due to the public scrutiny aroused about the finances of the firm and because of the complexity of its corporate structure.

It is expected that the firm will have a listing early in December on Riyadh’s Tadawul exchange. The listing, so held, is aimed at raising between $24bn-$25.6bn (£30.1bn-£33bn) from the Middle East investors to assist in modifying Saudi’s economy.

The Saudi oil giant is yet to announce a suitable date when its shares will begin to trade. Dhahran headquartered Saudi Aramco said, “The final offer price and the number of shares to be sold will be determined at the end of the book-building period.”

In the initial six months of the current financial year, Saudi Aramco made a profit of $68.2bn even though Aramco supplies nearly 13 percent of the world’s oil, the international investors are fully aware of Aramco’s exposure to geopolitical disruption.

As sources have analysed, Saudi Aramco has the rights to the largest reserves of crude with the lowest carbon footprint to extract. This ideation, however, misses out on the main reason why governments are concerned over carbon. As made evident, the major issue is not the carbon cost of getting it out of the ground, rather of what will be done later on.

As clearly stated by a fellow at Rice University’s Baker Institute in United States, Kristian Ulrichsen, it remains to be seen whether Saudi Arabia will be able to find “a compromise between the crown prince’s stated preference and market realities in their valuation of Aramco.”

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