Saudi Aramco Expected to Make History with Its IPO

May 10, 2016

By Thy

The global financial market is looking forward to another moment of history.

Saudi Aramco’s IPO, the supposed-to-be biggest IPO in history, is on its way with a three-way foreign listing plan, targeting exchanges in London, Hong Kong and New York. The plan aims to sell up to 5% of the national oil company. Exxon Mobil, BP and China’s Sinopec are among the giants that were reported to consider buying stakes in this historic IPO.

The IPO of the world’s biggest oil company which accounts for a tenth of global output is a part of Saudi Arabia’s “Saudi Vision 2030” plan. This plan is a turning point for the country as Saudi Arabia attempts to be less dependent on its oil industry. “We will not allow our country ever to be at the mercy of commodity price volatility,” said Saudi Deputy Crown Prince Mohammad bin Salman. “In 2020, I think we will be able to live without oil.” By diversifying its economy, the plan seeks to raise non-oil revenue and create wealth fund.

The valuation of Saudi Aramco is claimed to be at $2.5 trillion. However, Robin Mills from Qamar Energy thought the market value of the oil giant is probably just from $250 billion to $400 billion.

One of the important benefits of the IPO will be the transparency of the company. The IPO, which will debut in either 2017 or 2018, is handled by JPMorgan and banker Michael Klein. It is expected to be worth $125 billion, which will be five times larger than the world’s current biggest IPO deal of Alibaba Group in 2014.

The IPO will be huge for the stock exchanges included in the listings. Chance of Saudi Aramco to join London Stock Exchange increases after the election resulting in the first Muslim becoming a mayor in the United Kingdom. However, it is uncertain whether a U.S. listing will remain a possibility due to the anti-Muslim attitude of Donald Trump.

“We will take into account all of the impact on our indexes, how do the Saudi capital market perform as a whole, and will make sure that these components are part of the plan once we have more details about Aramco and the structure and how many shares will be floated,” said Tadawul Chief Executive Officer Khalid Al Hussan.

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