Saudi Aramco listing

Saudi Aramco, the world’s most profitable organisation, finally has a price tag. After years of delay, Saudi Arabia has placed a value of $1.71 trillion on the state-owned energy giant – making it also by far the most valuable company ahead of Apple. 

The company today is the most valuable enterprise in the world. With a staggering income of $111 billion last year, the company’s profit surpassed the combined profits of giants Apple, Shell, and ExxonMobil. The firm’s monopoly over oil production makes Saudi Arabia the kingpin of OPEC. Aramco has been on a recent acquisition spree with investments in secure energy markets. 

The company is aiming to sell about 1.5% of its shares in a partial privatization in an initial offering of around $25.6 billion, scaling down the original plan to sell up to five percent of the firm. This exceeded the float of Chinese e-commerce giant Alibaba in 2014. However, the blockbuster IPO still missed Crown Prince Mohammad Bin Salman’s initial target of $2 trillion. 

The offering has been the cornerstone of the Crown Prince’s ambitious plan to diversify the oil-reliant economy. The company has shied away from plans to listing on foreign bourses such as New York stock exchange due to litigation risks and financial transparency requirements. The long-discussed goal has now been seemingly been placed on ice.

Analysts have said the stock market debut could strengthen Saudi Arabia’s financial position. The company has listed a variety of risks ranging from terrorist attacks to geopolitical tensions. The attacks on oil facilities in September, claimed by Yemeni Houthi rebels, escalated tensions with arch rival Iran. The region was on the brink of another war until all sides expressed restraint.

Under the existing plan, the company will issue a third of the shares to locals, giving them a stake in the nation’s cash cow for the first time. The advertising campaign and social media is also stoking enthusiasm. It would be disappointing if there is not sufficient interest from within the region and investment goals are not met. There is the promise of dividends but the company can change policy without notice. 

A fossil fuel company, at a time when shifts to clean energy and increasing air pollution are taking precedence, will raise surely concerns. Investment in an absolute monarchy in a volatile region is also not an easy sell for many Western firms thus many are staying away from the company that catapulted Saudi Arabia as the region’s largest economy.