About Us Our Work News Contact NEWS How the Aramco IPO Could Impact Saudia Arabia and the World; the Bigger Picture. The biggest IPO in history could have a major impact on Saudi Arabia, the Gulf region, and possibly also Saudi Arabia’s position in the world. With $29.4 billion, Saudi Aramco’s IPO was the biggest in history. It even exceeded the $25 billion mega-debut of the Chinese online retailer Alibaba. An IPO of such size will undoubtedly have an economic impact beyond the country’s borders. Aramco valued its shares at 32 riyals ($8.53) apiece before its float on Riyadh’s stock exchange. On the first day of trading, the share price increased by 10%, bringing the overall valuation to just above $2 trillion. That makes the state-owned oil business the most valuable listed company worldwide. Apple, now the second-largest company by market capitalization, is valued at $1.17 trillion. Regional focus: Most buyers were from across the Gulf region The oil-giant decided not to offer shares on international exchanges, partly due to concerns for the valuation target of $2 trillion – foreign investment banks valued the company well below the target. Without the support of international investors, the IPO relied heavily on high-net-worth individuals and funds from the Gulf region. According to estimates, 75% of institutional buyers are Saudi company- and government-funds and 97% of retail funds come from Saudi Arabia and the Gulf region. More than an IPO: Saudi Arabia’s Vision 2030 The IPO is a milestone in the Crown Prince’s Vision 2030 reform program, a plan to reduce Saudi Arabia’s dependence on oil, diversify its economy, and develop public service sectors. The proceeds of the IPO will go to the government’s Public Investment Fund (PIF), which is the main driver behind the reform program. PIF finances a wide range of projects in the kingdom across multiple sectors. The IPO proceeds might help to accelerate these developments. Neighboring economies could also benefit from the IPO through possible new investments and increased liquidity. While Vision 2030 is mostly a domestic development program, the Saudi government may seek more outside investments in the future. One way to accomplish this could be offering Aramco stock to foreign investors. The Crown Prince has already suggested that up to 10 percent of Aramco stock could be sold in the future to raise $100 billion for Vision 2030. Even a foreign listing in either the UK or Asia is planned a few years down the road. All of this would go hand-in-hand with the vision of Ali al-Naimi – the first Saudi CEO of the company – who wanted Aramco to become a globally integrated energy company. IPO could increase transparency and improve trust Today, Aramco is responsible for 10% of global oil production and the most important single actor in the worldwide oil market. Still, it’s unlikely that the IPO will have any significant effect on oil prices. As the company has only offered 5 percent of its shares, its production strategy will remain in the hands of the Saudi government. However, as Aramco is now listed publicly, it has to adhere to stricter transparency and auditing standards. As the company will have to publish production figures and undergo regular audits, the result could be a better understanding of the actual size of Saudia Arabia’s oil market and increased trust by foreign business partners. The Aramco IPO was more than just another oil company going public. It was a strategic step by the Saudi government to achieve its domestic, regional, and global ambitions. The real impact will only become visible in the years ahead. How the Aramco IPO Could Impact Saudia Arabia and the World; the Bigger Picture. READ MORE Blockchain as an Asset Class: Why Investors Should Pay Attention READ MORE ALL NEWS ... About Us Our Work News Contact KEEP IN TOUCH with tomorrow and sign up for our newsletter SUBSCRIBE NOW © 2021 by Kingdom Investments LLC. All rights reserved.