Saudi oil giant Aramco kicks off milestone IPO

World's largest oil firm Saudi Aramco has set a price range for its much awaited listing which indicates that the oil giant is worth between $1.6 trillion to $1.7 trillion, making it potentially the world's biggest IPO.

Saudi Aramco announced that it would offer 1.5 percent of its shares in the upcoming initial public offering (IPO) on the Saudi Stock Exchange (Tadawul), Saudi Press Agency (SPA) reported.

Saudi Arabia has caved to pressure from global investors by announcing a price range for its stock market float of Saudi Aramco that would value the state oil company at up to $1.7 trillion (£1.3 trillion), significantly short of the £2 trillion price sought by Crown Prince Mohammed bin Salman.

This could just beat Chinese e-commerce giant Alibaba's record $25 billion NY stock market debut in 2014.

But the firm has said there are no current plans for an worldwide stock sale, indicating that the long-discussed goal had been shelved for the time being.

Aramco kicks off its investor road show on Sunday, but a source close to the company said that it will not be marketing the IPO overseas. The company doesn't plan to list shares on the New York Stock Exchange.

The newly released figures also revealed a valuation for the company that's between U$1.6 trillion and U$1.7 trillion (NZ$2.6 trillion), a figure that fell short of the US$2 trillion mark Crown Prince Mohammed bin Salman had sought.

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It has said the strikes will not have a material impact on its business.

If priced at the top end of the range, it could eclipse Alibaba to become the world's biggest IPO, Fadlallah added. When it initially announced plans to conduct a company IPO, Saudi Arabia's Crown Prince Mohammed bin Salman, predicted that the cost of a 5% stake would be $ 100 billion.

Prince Mohammed has said listing Aramco is one way for the kingdom to raise capital for the country's sovereign wealth fund, which would then use that revenue to develop new cities and lucrative projects across Saudi Arabia.

The bulk of the funds raised will go to the government's vast Public Investment Fund, the kingdom's main investment vehicle. Saudi Aramco beat American behemoths including Apple Inc. and Exxon Mobil Corp in terms of earnings.

It also acknowledged that climate change concerns could reduce demand for hydrocarbons.

Many Saudis are seeking to tap lenders and sell personal assets to raise money to invest in the share sale.

On the plus side, its reserves stood at 256.9 billion barrels of oil equivalent at the end of last year - sufficient for 52 years, much longer than the five major global oil companies who claim between nine and 17 years. In the first nine months of this year, its net profit dropped 18 percent compared with the corresponding period of 2018, to $68.2 billion.

  • Darren Santiago