Kingdom scales back plans for share sale after cool reception from international investors
Saudi Aramco will sell shares at a target valuation of $1.6 – $1.7 trillion, comfortably making it the world’s most valuable company.
The price announced on Sunday is some way short of the £2 trillion that Saudi Arabia’s ruler Crown Prince Mohammad bin Salman had once targeted but still higher than Microsoft, Amazon and Apple which are the only other firms ever to have topped $1 trillion.
Saudi Arabia’s national oil company will sell around 1.5 per cent of its shares next month when it plans to list on Riyadh’s Tadawul stock exchange.
Plans to raise up to $100bn have been pared back substantially and shares will not now be formally marketed outside of Saudi Arabia and other Gulf states, the Financial Times reported. Analysts have speculated that this is due to poor international demand.
The sale is now expected to generate closer to 96 billion riyals (£20bn) after Aramco faced a series of problems including drone attacks on two of its oil facilities.
Funds raised are to be channelled into the crown prince’s plans to shift Saudi Arabia’s economy away from its near-total dependence on oil revenues. Bin Salman’s attempts to portray himself as a modernising force have been undermined by the murder of journalist Jamal Khashoggi at the Saudi consulate last year.
Aramco’s sky-high valuation is based on churning out billions of barrels of oilfor decades to come, which environmental groups have warned will undermine efforts to halt catastrophic climate change.
Aramco produces more oil than any other enterprise – around 11.6 million barrels per day, worth $719m at today’s market price.
That volume of oil has made Aramco responsible for more global emissions than any other company in history by a comfortable margin, according to the Climate Accountability Network.
It also generates more profits than any other company with earnings of $111bn last year and a planned dividend of $75bn next year – five times more than Apple. Investors must weigh the large potential payouts with the expected decline in oil prices and production as the world shifts to low-carbon energy sources.
Despite moves to curb climate change, demand for oil remains high and Saudi crude is among the cheapest to extract, meaning it is unlikely to stop production soon.
The sale will generate a bonanza of fees for 27 banks that have been mandated to work on it, including Goldman Sachs, Citigroup, HSBC and JPMorgan.