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Biggest IPO In History Could Be Back On Again As Soon As Next Year

by Paul
IPO

For those investors who like a good IPO, news that Saudi Arabia has reasserted its commitment to floating Aramco, the Gulf kingdom’s national oil company, will be welcomed. Saudi Arabia’s Crown Prince Mohammed Bin Salman, the oil-rich kingdom’s controversial de-facto ruler has stated that he is planning to first float Aramco on the country’s domestic exchange. He added that a dual listing on at least one major international exchange was also on the cards. That step, he said, would be taken by “early 2021” at the latest.

Saudi Arabia itself believes Aramco is worth $2 trillion. Some outside analysts believe that $1 trillion might be closer to the mark but it is difficult to know since very limited company information has even been made public. However, that will have to change in the run up to any IPO and independent analysts invited in to review the company’s accounts and geological data on proven reserves.

The announcement can be expected to reignite intense competition between London, Wall Street and major Asian exchanges to be the chosen host of any eventual international listing. Even at the lower $1 trillion valuation and only a small minority of the company’s total shares being publically listed, Aramco would be expected to immediately challenge Microsoft and the other tech giants vying for the crown as the world’s largest company.

Saudi Aramco’s oil fields yield as much as 10% of the world’s entire oil supply with around ten million barrels a day pumped out of them. Saudi Arabia’s known reserves, which Aramco manages, are thought to contain 260 billion barrels of oil.

Until Crown Prince Mohammed Bin Salman’s recent comments, it was thought plans for an Aramco float had been shelved for the foreseeable future. Doubts over investor appetite for an oil float of that size in an era when analysts are unsure of the long term viability of the industry as technology moves towards electric vehicles and climate change regulation will start to put additional cost pressures on fossil fuels. Last year’s controversial murder of Saudi journalist Jamal Khashoggi, which took place in the kingdom’s Istanbul embassy, also soured international relations.

A recent $10 billion bond raise by Aramco was taken as conclusive evidence an IPO was no longer on the agenda until the crown prince’s interview in the Asharq al-Awsat newspaper at the weekend. He is quoted by the interviewer as stating:

“We are committed to the Aramco IPO, given the proper circumstances and the right time. It will happen between 2020 and early 2021 and setting the location of the IPO now is premature.”

It is believed an Aramco IPO would target the raising of around $100 billion. The crown prince wants to plough those proceeds into diversifying the desert state’s economy which despite significant investment over the years is still heavily reliant on oil sales.

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