Farhan Hassan*
The Fourth Apple, ARAMCO IPO

Introduction

It is said that three apples changed the world, namely Adam apple, Newton apple, and Apple - Apple Co.

Would the fourth apple be Aramco's largest IPO in history as an investment?

 Let us see that and this is what the future that I hope will be revealed.


Saudi Aramco

Saudi Aramco officially the Saudi Arabian Oil Company (formerly Arabian-American Oil Company), is a Saudi Arabian national petroleum and natural gas company based in Dhahran, Saudi Arabia has an estimated 270 billion barrels in reserves. Aug 12, 2019

Saudi Aramco traces its roots to 1933 when a deal was struck between Saudi Arabia and the Standard Oil Company of California, which later became Chevron, to survey and drill for oil, creating a new firm to do so. In 1944, CASOC's name changes to the Arabian American Oil Company (ARAMCO). In 1988, ARAMCO becomes a state-owned company, and renamed the Saudi Arabian Oil Company (SAUDI ARAMCO).Nov 19, 2017.


Worth of Saudi Aramco 


 • Aramco announced a net profit of $ 68.2 billion in the first nine months of this year, or about 266 billion Saudi riyals, down 18% from the same period last year.

• Moody's now says Aramco's 2018 net income was $111.1 billion.

• Fitch reported that at the end of 2018 Saudi Aramco had "cash and cash equivalents" of $49 billion.


Aramco vs. Others Co.

With $111 billion in net income in 2018, Saudi Aramco, had bigger returns last year than Apple Inc. and Exxon Mobil Corp. combined. 

It is bigger and more profitable than Apple, Alphabet and Amazon combined. Aramco opens its books in the first step toward a potential public listing. Apr 1, 2019

 


Saudi Aramco IPO

The Saudi government has decided to float 5% of Aramco in 2018 in a deal that would raise as much as $100 billion.

IPO has divided it into a local IPO in the Saudi stock market and an international IPO in international stock exchanges such as London, New York, and other stock exchanges if required.

The value Aramco is expected to be at some $2 trillion, making it the world's most valuable publicly-traded company. As it is the world's largest energy producer and with the largest proved reserves.

The capital markets except that it will be the world’s most valuable publicly-traded company.

at this price, the government’s 5% would bring in $100 billion, which is to be devoted to diversifying the Saudi Arabian economy away from energy.



Local IPO:

Saudi Aramco Chairman Yasir Al-Rumayyan announced that the company’s initial public offering (IPO) would go ahead. We expect the event to take place around mid-December.

 

1. ARAMCO having received approval, will list a small number of shares on the Saudi stock exchange Tadawul, in an initial public offering. 

2. Retail investors, under “tranche B” of the issue, are the individuals who want to buy or sell shares on their account, rather than as part of an investing institution.

3. Saudi nationals can buy shares for themselves and their families (as long as they are registered on the family ID card) and will be eligible to receive bonus shares (100 each, as long as they hold the original IPO shares for a minimum of 180 days after first listing).

4. The IPO is open not just to Saudi citizens, also, any non-Saudi person who is a resident in the Kingdom and any Gulf Cooperation Council national can also buy shares and be eligible for the bonus issue, as long as they bank with one of the institutions on the IPO-approved list.

5. The company added that it would distribute interim dividends up to a maximum of $ 9.5 billion, after obtaining the necessary approvals from the Board of Directors, before the date of the announcement of the final allocation of shares offered to the underwriters and individual subscribers.


International IPO:

Saudi officials are weighing whether to list the privatized Aramco on the London or New York stock exchanges.

Aramco has opened its books for the first time since its nationalization 40 years ago to international rating agencies Fitch and Moody's in April as part of its preparations to raise funds from investors.


Some steps are going on:

• The Saudi government has lowered taxes and royalties (previously 85% and 20%, respectively) on Aramco to make it more attractive to outside buyers.

• Saudi Arabia decreased the income taxes Aramco pays to the government from 85% to 50%. 

• The financial results were issued after the company announced its intention to issue a share of its shares for public subscription. 


International investors main concerns

1. How the oil price and the ability to produce given temporary OPEC production cuts will affect the earnings capability of Aramco.

2. The geopolitical situation in the region. 


Overcome the concerns due to:

• The excellent audited financial results over the years.

• The company is well run.

• Oil demand is set to increase for more than a decade, according to the International Energy Agency.

• Saudi Aramco accounts for 10 percent of global oil production and, as such, is vital in terms of guaranteeing global energy security.


What they Said about ARMCO IPO? 


"We want to get financial investors from all over the world," 

Yasir Al-Rumayyan, ARAMCO chairman 

 

"(The IPO) will increase our international visibility as the leading company in the world," 

Amin Al Nasser, ARAMCO CEO 


“Based on a valuation of nearly $ 2 trillion, Aramco could raise $ 40 billion, surpassing the $ 25 billion record collected by Chinese e-commerce Alibaba in 2014."

Reuters


"Chinese state-owned entities are in talks to invest $ 5-10 billion in the initial public offering of Saudi oil giant Aramco." 

Bloomberg

 

“Saudi Aramco will sell up to 0.5% of its shares to individual investors in what could be the largest initial public offering in history.”

CNBC


Epilogue

Finally, the decision to invest in individuals or companies is particular and personal.

We have tried here to clarify things despite the scarcity of information and sources that it was accumulated and analyzed from statements of Aramco, reports, and articles by analysts to help you in making the right decision and I hope that what we presented useful to you.


 



Farhan Hassan

‏e-mail :fhshasn@gmail.com

Twtr: @farhan_939

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