Aramco declares $1.71 trillion valuation in blockbuster IPO

Saudi Aramco declares IPO
Source: Saudi Aramco

Earlier this month, Saudi Aramco announced its plans to go public. Now, the company has put its valuation up to $1.71 trillion. Although it could be the world’s largest IPO, it is less than Muhammad Bin Salman’s original target of $2 trillion.  

According to Aramco, it would sell around 1.5 percent of the company in an initial public offering of $24 billion to $26 billion. However, the company has deviated from the original plan of selling up to five percent of the firm. The company’s spokesperson said, “The overall base offer size will be 1.5 percent of the overall shares.” The company took bids from investors at a price range of $8 to $8.5 per share.  

This delayed offering is the ambitious plan of Prince Muhammad to diversify the oil-dependent economy. Moreover, this offering could become the world’s biggest listing by exceeding the $25 billion of Alibaba in 2014.  

Initially, there were expectations that Aramco would list two exchanges. The first would be the flotation of two percent of the Tadawul bourse. The second would be the three percent on an overseas exchange. However, the firm has confirmed that it doesn’t have plans for an international stock sale. Moreover, the IPO is banking on local demand, with one-third offering for Saudi retail investors.  

Aramco will start the investor roadshow on Sunday. However, a source close to the company made it clear that it won’t market the IPO overseas. The source didn’t explain; however, the company backed down from its plans to list foreign exchanges, like New York owing to litigation risks.  

There have been several delays in the launch since the idea was first announced in 2016. However, back then, investors were skeptical of the $2 trillion valuations of Prince Muhammad Bin Salman.  

Tarek Fadlallah, the chief executive officer of the Middle Eastern unit of Nomura Asset Management, said in a statement, “We believe that this price is a good compromise and it will sell.” 

If the IPO is at the top end of the range, it might surpass Alibaba to become the world’s largest initial IPO. The interesting thing is that Saudi Arabia is doing its best to make sure that the IPO is a complete success. It is an essential part of Prince Muhammad Bin Salman’s plan to make the Saudi economy less dependent on oil and more on non-energy industries.  

The S&P Global Ratings said, “If the funds are used effectively, they could boost the economic growth in Saudi Arabia. We know that the majority of the raised funds will go to the government.” Moreover, the government is continuously pressurizing wealthy Saudi business elites to invest in Saudi Aramco.  

There are expectations that Prince Al-Waleed bin Talal would invest in the company. He is a Saudi billionaire tycoon who was held at the Ritz-Carlton Hotel in Riyadh during the crackdown against corruption.  

Prince Waleed Bin Talal
https://www.flickr.com/photos/doinikbarta/

Last week, a senior cleric Abdullah al-Mutlaq said that he would get ordinary Saudis to invest in the IPO. He also mentioned in a local television program that Islam allowed it, and religious scholars would also invest. Moreover, there are reports that the firm is struggling to get foreign investors. 

Saudi Aramco knows that it should be honest with the investors. That’s why the company released a prospectus in which it listed the risks of investing, ranging from terrorist attacks and geopolitical tensions to anti-trust legislation. A notable element was a warning that the global demand for oil may increase in the next 20 years.  

The company also acknowledged that the concerns of climate change could reduce demand for hydrocarbons. However, Aramco has an excellent appeal for retail investors. Many Saudis are selling their personal belongings to invest more and more money in the share sale. Last year, the company had a net profit of $111.1 billion. However, this year, the profit has dropped 18% to $68.2 billion.  

 

Have a tip we should know? tips@rhd.news

Most Read

  1. ARTS
    With a Vengeance and no Apologies, Art Basel Miami Beach Has Returned
    12 months ago
  2. Food
    Is Faux Turkey Finally Vegan-Approved for Thanksgiving?
    1 year ago
  3. News
    Pandora Papers Financial Leak Shows Us the Secrets of the World’s Rich and Powerful
    1 year ago
  4. Health
    US Supreme Court Rejects J & J TALC Cancer Case Appeal
    1 year ago
  5. Lifestyle
    9 Habits that Drain your Daily Focus and How to Avoid Them
    2 years ago
  6. BUSINESS
    Women’s Demand for Shapewear – the big Trends
    2 years ago
  7. BUSINESS
    Valentino Launches its Cosmetics Line
    2 years ago
  8. Business
    McDonald’s Sales Increase Amid COVID Restrictions
    2 years ago
  9. Health
    US Promises to Share 60 million Doses of AstraZeneca Vaccines
    2 years ago
  10. coronavirus
    UK Offers Aid Amid Surging COVID-19 Cases in India
    2 years ago
  11. Entertainment
    Nomadland Director Chloé Zhao, Wins the Best Director in 2021 Oscar
    2 years ago
  12. Asia
    Pakistan floods: ‘The water came and now everything is gone’
    3 months ago
  13. News
    Iraq: At least 23 dead amid fighting after Moqtada al-Sadr quits
    3 months ago
  14. News
    Pakistan floods are ‘a monsoon on steroids,’warns UN chief
    3 months ago
  15. BREAKING NEWS
    Pakistan floods: Desperation and displacement in Sindh province
    3 months ago
  16. Enviroment
    Climate change: Russia Burns off Gas as Europe’s Energy Bills Rocket
    3 months ago
  17. News
    Ukraine war: Russia railway station strike kills 25, injures dozens
    3 months ago
  18. News
    Sewage in sea: French appeal to EU over UK discharges of waste
    3 months ago

Follow @rushhourdaily: