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4 July 2018

Saudi Arabia’s Aramco Was Really Close to Have the IPO of a Lifetime—What Went Wrong?

Even though that the monarchy has absolute power inside the borders, nobody is an exception to global changes.

When it comes to Aramco (formerly known as Arabian-American Oil Company) we are talking about one of the biggest state-owned enterprises in the world, with a market value that has been estimated at nearly $14-21 trillion, reclaiming the top spot as the most valuable and profitable company by revenue on the planet.

Founded in 1933 as a complex and wide partnership between the Saudi Arabian government and many American oil giants of the time, Aramco now has the second-largest proven oil reserves and the second-largest daily oil production of the world. Taking into account all these massive numbers, it is not surprising how some international investors reacted when prince Mohammed bin Salman planned to sell in 2016 some shares of the kingdom’s main source of income.

There is no joke in a business that makes 10 percent of the world’s oil exports annually. According to analysts, the initial public offering (scheduled for 2018) would be the greatest of all-time, with a speculative amount of $100 billion, automatically creating the most valuable listed company of our time, doubling Apple Inc. current market valuation ($926.9 billion).

Why Did Not It Happened (Yet)?

Delayed to the second or third quarter of 2019, the real reasons behind this quiet withdrawal are:

  • Doubt from the global press, leading to uncertainty between high-rank investment circles and institutions.
  • Relentless hype from the Saudi Government around an non-existent date.
  • Some strong leaders within the company believe that the IPO won’t happen.
  • A lately lower valuation of the company as US President Donald Trump tries to keep the price of gasoline under control, via diplomatic measures that forced the Saudis to pump more oil.
  • The social and economic reforms that are reshaping Saudi Arabia’s culture (e.g. Women’s rights)
  • Cases of corruption within the Kingdom.

Petro dollars make a notable difference in countries like Saudi Arabia, they can be used to finance the flamboyant lifestyle of the monarchy, to buy political loyalty in nearly all sectors of the society and to maintain a prosperous economic stability meanwhile. We can be sure that once the IPO gets done, some princes that were already rich, will look almighty.

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