The last few months have seen a spate of rumors about the much-hyped future—or potential—initial public offering of Saudi Aramco. At the beginning of 2016, Mohammed bin Salman (commonly referred to as MbS), now the Crown Prince of Saudi Arabia, dropped a bombshell when he told The Economist that Saudi Arabia was considering taking the Kingdom’s national oil company public. Several months later, during his first televised interview, (which took place in Arabic on Al Arabiya News) MbS again addressed the IPO and offhandedly suggested that Aramco might be valued at $2 trillion.
Since then, much has been debated about the future of the company that has been solely owned by the King of Saudi Arabia since 1980. (The King has commonly been referred to as “the Shareholder” in company parlance). Many believe the company may only be valued at $1.5 or $1 trillion. One analysis put the value at $500 billion. Others have argued that the IPO will not happen, and recent news has been replete with speculation that a private sale to Chinese interests was more likely. What is known is that if a portion of Aramco is sold, it will almost definitely be at a valuation that far eclipses the top Silicon Valley companies .
Here is a roundup of the different potential scenarios for a sale of a portion of Saudi Aramco.
- The first scenario is an IPO as described by MBS. Aramco would IPO about 5% of the company sometime between the end of 2018 and 2019. Shares would be listed on multiple exchanges to accommodate the size of the sale and to convenience potential investors. One of these exchanges would surely be Tadawul, the 10-year-old Saudi exchange, but some combination of New York, London, and Hong Kong would be included as well. Saudi Arabia would likely sell secondary shares with the proceeds going to the existing shareholder (the King) instead of the company. In reality, the proceeds from the IPO would be used in part for the general government budget and in part to help fund the PIF. Alternatively, it is possible that prior to the IPO Saudi Arabia would transfer ownership of Aramco to its Public Investment Fund (PIF) which would then sell shares in an IPO (of course, the King, by virtue of his sovereignty, owns the PIF for all intents and purposes). The King would also have the opportunity to sell further shares in the public markets in future years.
Amin al-Nasser, Chief Executive of state oil company Saudi Aramco, attends the 18th International Oil Summit in Paris on April 27, 2017. (ERIC PIERMONT/AFP/Getty Images) - In a different scenario, one that has raised attention and been the subject of rumors recently, the King would sell a portion of his shares in Aramco to a private buyer or multiple private buyers. Again, this would likely…