An IPO For the Ages: Saudi Aramco

When I am not thinking about cryptocurrency’s market valuation of over $700 billion dollars, I am eagerly anticipating Saudi Aramco‘s Initial Public Offering (“IPO“). Saudi Arabia is the world’s largest oil exporter and there is much speculation about Aramco’s value with figures ranging from $500 billion to $2 trillion being mentioned by Crown Prince Mohammad Bin Salman. This IPO is poised to be the biggest, ever.

Further, Goldman Sachs and Citi are set for appointment in managing the IPO.  Bloomberg Markets stated:

“Saudi Arabia is seeking to sell as much as 5 percent of Aramco as part of a plan by Crown Prince Salman to set up the world’s biggest sovereign wealth fund and reduce the economy’s reliance on hydrocarbons.”

Saudi is seeking to diversify its economy away from oil and into tourism and technology under its Vision 2030 plan and as of January 1, Aramco has changed its status to a joint-stock company, which:

“Establishes the framework to allow future investors to hold shares in the company alongside its shareholder, the government.”

Apart from this legal status change, CNN Money has reported the following:

1. The government will retain complete control over how much oil Aramco produces, to serve “the state’s goals politically and economically.”

2. Saudi Arabia will be able to buy back all Aramco stock from shareholders, at a price of its choosing, provided it can persuade at least 75% of non-government investors to agree.

3. The government will appoint six members of Aramco’s board, including the chairman and deputy chairman.

4Other shareholders who own more than 0.1% of the company will be able to nominate candidates for the remaining five boardroom seats.

5. Members of Aramco’s board will have their pay capped at 1.8 million riyals ($480,000) per year, unless specifically approved by shareholders.

Moreover, according to the company’s bylaws published by the official bulletin:

“Aramco has a fully paid capital of 60 billion riyals ($16.00 billion) divided into 200 billion ordinary shares.”

In addition to listing on the Saudi Stock Exchange, international stock exchanges including Hong Kong, Tokyo and London, are competing for the listing. In fact, President Donald Trump even tweeted:

tweet

According to Forbes, Aramco was originally an America company founded by Chevron. Beginning in 1972 however, the Saudi government began purchasing shares of the company until in acquired the entire company in 1980.

“Aramco currently has a production capacity of 12 million barrels of oil per day and rights to at least 260 billion barrels of recoverable oil owned by Saudi Arabia.”

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