Saudi Aramco IPO can have far reaching implications for the world

According to Prince Mohammed bin Salman of Saudi Arabia, the Saudi Aramco valuation stands between $2 trillion and $3 trillion. The valuation puts the company right at the top of the chart in the first place among the world’s companies with the greatest worth in monetary terms. Given this and that fact that the world will continue, in the foreseeable future, to depend heavily on Saudi Arabia for its energy needs, the fact is rather evident that the Saudi Aramco IPO will be a major event in the global business arena.

Less than 5% stake to be sold

The Deputy Crown Prince has also confirmed that the IPO will only cover less than 5% of the state’s oil company. The idea is to make Saudi Aramco a holding company that is managed by an elected board, he affirmed. This is part of the Saudi Vision 2030 program. Experts studying the Gulf market say that the IPO will bring about unprecedented change both in the local stock markets and also in making the economy itself more transparent. The shares of the oil giant will list on Tadawul, which is the Saudi stock exchange and also probably in the U.S. on a local exchange here.

To put things in perspective about the kind of financial firepower that Saudi Aramco wields, it produces over 10 million barrels each day. ExxonMobile, the world’s biggest listed oil company falls way short of this daily production with Saudi Aramco overshadowing it with nearly thrice as many barrels being churned out each day. Even more impressive is that fact that Aramco’s reserves are estimated to be 10 times as expensive as ExxonMobil’s. There is also a plan to sell off some subsidiaries of Aramco as part of the IPO exercise.

Boost to Saudi markets

The IPO is being seen as a move to give the Saudi stock markets some impetus to start competing at world scale. At the grass roots level, this is aimed at making the country less dependent on its oil reserves. The high dependence on bank financing is not healthy for the nation and this is something that has been becoming more and more evident to the nation’s leaders. The Saudi Aramco IPO will not only help Saudi Arabia move away from the reliance on black gold but also move on to a more corporate friendly system that mimics the world’s other powerful economies.

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