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Saudi Arabia approves IPO of world’s most profitable company

More than three years after Crown Prince Mohammed bin Salman first raised the idea — and just three weeks after a plan to launch the share sale was abruptly shelved — oil giant Saudi Aramco announced its intention on Sunday to list shares on the local stock exchange in Riyadh.
That came shortly after the Capital Market Authority approved the offering.
The number and percentage of Aramco shares to be sold will be determined at the end of the book-building period, according to the company’s announcement of its intention to list. Trading is likely to start in December.
Aramco, which pumps about 10 percent of the world’s oil, generated the most profit of any corporation last year with net income of US$111 billion — more than Apple, Google’s parent Alphabet and Exxon Mobil combined. The company was targeting a US$2 trillion valuation — more than double that of Apple — but the kingdom is now ready to accept a valuation of US$1.6 trillion to US$1.8 trillion to ensure the IPO is a success, according to people briefed on the matter.

The sale is key to Prince Mohammed’s Vision 2030 plan to overhaul the Saudi economy and end the kingdom’s reliance on oil exports. The proceeds from the IPO will boost the firepower of the OPEC nation’s sovereign wealth fund, which already has investments in funds managed by the Blackstone Group and SoftBank Group.
Grabbing a role in the deal has been one of the most hotly-contested mandates for global banks. More than 20 have been mandated, with the top roles going to firms including Citigroup Inc., Goldman Sachs Group Inc., and JPMorgan Chase & Co.
But the path to the announcement hasn’t been smooth. Prince Mohammed’s insistence the company is worth US$2 trillion has been met with skepticism from the international investment community. The original plan to list Aramco in either New York or London has been dropped in favor of a Riyadh-only flotation.
To get the deal done, Aramco’s bankers will need hefty contributions from the kingdom’s wealthiest families, many of whom have already been targeted in 2017’s declared corruption crackdown that saw scores of wealthy Saudis held in Riyadh’s Ritz-Carlton Hotel. Authorities said they raised over US$100 billion in settlements from people it accused of graft. — Bloomberg