Finally the debate around the valuation of Saudi Aramco has been settled. The total valuation of the oil giant and the most profitable company in the world has been set at between $1.6 trillion to $1.7 trillion which is lower than the $2 trillion valuation that was proposed by the Saudi crown prince. However despite the lower valuation, the soon to be launched IPO of the company wills still be the largest ever in history.
The company will be putting up for sale 1.5% of its shares or about 3 billion shares which will be indicatively valued at between 30 riyals ($8.00) to 32 riyals, Aramco said. That set the total valuation of the company at as much as 96 billion riyals ($25.60 billion) according to the upper range of the indicative price of one share.
If the shares of the company sell towards its top range, it would be slightly larger than the Chinese e-commerce giant Alibaba’s IPO revenues of $25 billion that it generated from its IPO launch in 2014 in New York.
The aim of the Saudi government behind the public gloating of Aramco is to generate enough funds to reduce the dependence of the country’s economy on oil exports and diversify into other revenue generating streams.
According to reports, currently IPO has no plans to take its IPO that it is set to launch at on its domestic exchange abroad. This also means that the company will not hold any road shows on foreign land promoting its IPO.
“This will put the burden of the deal on local and regional banks,” said a report quoting a source with knowledge of the matter. “This means most of the investors will participate as Qualified Foreign Investors in a Saudi transaction,” the report further quoted a second source as saying.
The public announcement of the much awaited Aramco IPO was flagged off on November 03 after it had been deferred a number of times. The company however had not made any formal announcements for its IPO earlier. The idea of an IPO for Aramco was first talked about four years ago by Prince Mohammed who wants to use the money generated from the IPO for making fruitful investments in non-oil industries and generate employment in such industries.
However there is still some conjecture about the actual worth of the secretive company in the investment world. A wide valuation range for Aramco of between $1.2 trillion to $2.3 trillion had been projected by analysts from banks working on the Riyadh bourse.
Aramco has already announced a planned dividend of $75 billion next year which is about five time more than the dividend paid by apple and is the larger compared to any S&P 500 company. Recently, in the wake of the IPO, Aramco published parts of its last quarter numbers which showed that currently it is the most profitable company in the world.,
(Adapted from WSJ.com)