Saudi Aramco: The $2 trillion IPO is back

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Last week the Saudi energy minister Khalid al-Falih announced that plans are underway to list Saudi Aramco, the world’s largest oil company, within the next two years. The Aramco initial public offering (IPO) is the linchpin of Saudi Crown Prince Mohammed bin Salman’s plan to restructure the country’s economy.

The company is looking to sell a five percent stake for $100 billion, valuing the company at $2 trillion – twice the size of any other company listed worldwide and over six times the size of Exxon Mobil, the current largest listed oil company. The income from the sale will be used to help transition the Kingdom into a post-hydrocarbon age. These funds would go to the Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund (SWF). In comparison to other regional SWFs the PIF is relatively small. However, Saudi Arabia’s Vision 2030 envisions the PIF as a giant investment vehicle for the Kingdom to help diversify its economy and reduce its reliance on oil revenues.


IPO plans had been put on hold last year following more than two years of work, after Aramco instead purchased a $69 billion purchase of a 70 percent stake in local petrochemical firm Saudi Basic Industries Corp (SABIC). The original plan had been to sell up to five percent of Aramco, although a decision had not been made as to whether the listing would be on overseas exchanges or solely domestic. Plans have now been pushed back to late 2020 or early 2021.

Speaking to reporters after the OPEC+ meeting in Vienna last week al-Falih said, “The IPO process was never suspended fully … We’ve always been clear the IPO will happen within the 2020-2021 timeframe.”

Al-Falih went on to state that the acquisition of SABIC and the Aramco bonds sale in April earlier this year were the two main reasons for the delay in the IPO. With these behind the company, he added, the focus is now on the IPO.

The bond sale raised $12 billion, the company’s first foray into the international financial system. The organization’s bond market debut led to Aramco opening its books for the first time. In 2018 the state-owned company reported profits of $111 billion, likely driving demand for its bond offering and leading the original $10 billion offering to be oversubscribed by a factor of 10 – reportedly a record for an emerging market debt deal.

The strong interest in Aramco’s bonds is likely to have played a role in the revival of interest in the partial IPO.

Aramco had been working with HSBC, JPMorgan, Morgan Stanley, Evercore and Moelis on the planned sale. It is unclear as to whether the same institutions will be involved. Bloomberg has reported that sources familiar with the matter state that Aramco has held meetings with a group of investment banks to discuss their roles in the IPO.

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