World’s largest IPO poised to double Middle East energy juggler looks to raise $50 billion

While U.S. stocks are jumping up and down to record highs, Saudi Aramco, an oil giant in the Middle East, is planning something that will shake up global capital markets.Saudi Arabia has revived plans to sell shares in its oil giant, aiming to raise nearly $50 billion on local and international exchanges, equivalent to about 2.5% of the company at its current market value, media reported on Friday.Aramco executives have held internal meetings with outside parties to discuss selling shares simultaneously on the Riyadh stock exchange and overseas, with London and Singapore as possible options for a secondary listing, according to people familiar with the matter.To be clear, the current record for the world’s largest IPO is itself set by Saudi Aramco.The company raised a total of $29.4 billion when it listed on the local bourse in 2019, but the IPO hardly fully realized the kingdom’s ambitions.In its last IPO, Saudi Aramco initially planned to raise $100 billion by selling 5% of its shares, which naturally required listing on a major international exchange.But as international investors balked at the pricing, the offering eventually moved to a local exchange and the share sale was reduced to 1.5 per cent.More importantly, the final $1.7 trillion valuation is also below the $2 trillion the crown prince had in mind.The latest round of share sales, also reportedly driven by the crown prince himself, is aimed at closing by the end of this year or early next year.In fact, the Crown prince himself said in a television interview last April that the kingdom was in talks with foreign investors about selling Aramco shares, that foreign energy majors had expressed interest, and that an announcement about selling more shares on the Saudi stock exchange “could be made in one to two years.”The timing is perfect: Crude oil prices have surged nearly 60% in the past year and this week returned to above $90 for both U.S. and Brent, their highest levels since 2014.Cloth oil, for example, is up nearly 60 per cent over the past year.Demand for crude oil is expected to pick up as the global economy recovers and containment measures are gradually lifted, while some producers are already showing signs of faltering production.Aramco’s stock price has also tracked oil prices, with a market value of nearly $2 trillion as oil prices have soared.It is important to note that, given the illiquid market in which the stock is traded, it is not known whether international investors would appreciate such a valuation.Interestingly enough, people close to the company told the press that the company’s strategy is to get as much cash as possible while investors remain interested in petrochemicals assets, as more and more money is being sold in the name of environmental protection and carbon reduction.In December, Aramco sold 49% of its gas pipeline business to a consortium led by Blackstone and Hassana investments for $15.5 billion.Aside from being “green”, Aramco’s asset quality is actually quite high and it is the fourth most profitable public company in the world, behind Apple, Alphabet and Microsoft.(Credit: Financial Union)

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