Shares for $50 billion
New attempt at IPO of Saudi Aramco
02/05/2022, 12:55 p.m
Saudi Aramco is the most valuable oil company in the world. The first IPO of 2019 took place in a slimmed down form and only in Saudi Arabia. Now a lavish block of shares is to be sold on an international stock exchange for the first time. It would be the largest placement in stock market history.
Saudi Arabia has resumed plans to list more Aramco shares. According to people familiar with the company’s strategy, a stake of up to $50 billion will be placed, representing around 2.5 percent of the company at current valuations.
Executives at state-owned Saudi Arabian Oil, as Aramco is known, have been in talks internally and with external advisors about placing additional shares. The talks concern the Riyadh stock exchange and a secondary listing, possibly in London, Singapore or other locations, the people said.
London is the preferred listing location, added one of the people. The company spoke to investors there to gauge their willingness to list, the person said. Saudi Arabia has also revived plans from the last IPO to attract investors from China, some of the people said, but nothing has been decided yet.
The listing would be by far the largest in the history of the capital markets and could prove difficult. The company set the previous record for the world’s largest IPO in 2019, raising $29.4 billion on the Saudi Tadawul Stock Exchange.
The sale of shares is still in the planning phase and could be delayed or changed, the people said. Riyadh has launched various fundraising plans through Aramco over the years, some of which ultimately failed or were abandoned.
The 2019 listing was a stripped-down version of Aramco’s original ambitions to list 5 percent of the company for up to $100 billion, including on a major international stock exchange. However, international investors were skeptical about the company’s leadership and the price of the shares, which valued Aramco at $1.7 trillion. In the domestically limited IPO, 1.5 percent of the company was eventually listed. A spokeswoman for Aramco declined to comment.
The Crown Prince’s strategy
Saudi Arabia has long wanted to sell parts of the oil company. This is part of a strategy developed by Crown Prince Mohammed bin Salman to monetize the country’s massive oil reserves and use the proceeds to invest in non-oil sectors. According to one of those involved, the aim is to complete the placement by the end of the year or early next year. The plan is being pushed by the crown prince, the person added.
Discussions about another share sale come at a time when oil prices have hit their highest levels since 2014, fueled by rising demand, tighter supply and concerns about instability in Eastern Europe and the Middle East. Brent crude, the global benchmark, traded above $93 a barrel on Friday, up 57 percent over the past year.
Riyadh-listed shares of Aramco have risen in tandem with the price of oil and other major oil company stocks over the past few months, and currently has a market cap of nearly $2 trillion. The company’s shares are lightly traded compared to western markets and are not owned by many international investors. It’s unclear if the company’s current valuation could be matched in larger markets within the country.