Saudi Aramco finally announced it would begin its long-awaited initial public offering (IPO) this morning after nearly four years of uncertainty and delays.
The world’s most valuable company will list on Saudi Arabia’s domestic Tadawul exchange in December, with an international float planned afterwards.
Sources told Reuters that the initial plan is to sell one to two per cent of the company, which has been valued at $1.5 trillion by independent investors.
Such a valuation would make Saudi Aramco at least 50 per cent more valuable than Apple and Microsoft, each of which have a market capitalisation of $1 trillion.
Despite being below Crown Prince Mohammed bin Salman’s personal preference for a valuation of $2 trillion, a two percent sale at $1.5 trillion would raise up to $40bn for the kingdom, making it the largest IPO of all time.
The oil giant’s chief executive said that the prospectus for the IPO would be issued on 9 November, with both the institutional and retail investor roadshow to take two weeks.
This is far quicker than the four to six weeks the process would normally take on the Saudi bourse.
Chairman Yasir al-Rumayyan told the press conference that the valuation for the company should be determined after the roadshow.
The company also announced that Saudi nationals subscribing to the listing would be eligible for bonus shares.
A statement from the company also said that it posted a net income of $68bn during the nine-month period ending on 30 September, with revenues amounting to $244bn.
More than two dozen banks are handling the IPO, including Citigroup, Credit Suisse, Goldman Sachs, HSBC, JPMorgan, Bank of America Merrill Lynch, Morgan Stanley.
Analysts welcomed the move, which had been expected. Neil Wilson, chief market analyst at markets.com, said: “It’s time to bite the bullet.”
“The world is awash with crude, and it will be very hard to get prices any higher with demand forecasts for 2020 as low as they are.”
Some, however, were concerned over the valuation. Michael Hewson, head markets analyst at CMC Markets, said:
“A $2trn valuation seems a bit rich at a time when oil as a fuel is in decline, and renewables becomes more mainstream.”
The sale is an essential element of bin Salman’s Vision 2030, as it will be a main source of funding for his plans to diversify the Saudi economy away from fossil fuels in the next decade.
Main image credit: Getty