Saudi Arabia Plans World's Largest IPO

CHENNAI: Saudi Arabia has announced plans to debut the world’s largest IPO. The proposal involving up to 5% stake sale in state-run oil firm Saudi Aramco, will not only be the largest-ever public offering, but also allows the oil-dependent economy to diversify.

“By selling even one per cent of Aramco, it will be the largest IPO in the world,” said Mohammed bin Salman, Deputy Crown Prince, said on Monday at a media interaction valuing the company at between $2 trillion and $2.5 trillion.

Unveiling his ‘Vision 2030’ programme, which can propel the kingdom from being the world’s 19th largest economy to top 15, Mohammed said, “This is not a dream. This is a reality that will be achieved, God willing.”

Part of the funds from the share sale will be used to set up a $2-trillion sovereign wealth fund, which would easily surpass Norway’s $865-billion fund as the world’s biggest.

Aramco is believed to have crude reserves worth 265 billion barrels, more than 15% of global oil deposits, and produces more than 10 million barrels per day, three times as much as the world’s largest listed oil company ExxonMobil. However, Saudi’s decision to diversify comes amid volatile global oil prices that hit a 12-year-low this year owing to supply glut, while oil producing nations were yet to reach an agreement to freeze or lower oil production output in order to reduce excess supply.

According to Mohammed, Aramco’s listing would be on the Saudi stock market, though they were considering an idea to set up a fund in the US market, which would then buy shares in Aramco to help bring liquidity. This will be the world’s largest investment fund and could help Saudi to explore opportunities beyond oil production.

Aramco’s Subsidiaries would also be sold in IPOs as part of a privatisation drive and to bring more transparency to the oil giant, he said.

Meanwhile, the plan also includes major structural reforms, privatisation and efforts to increase government efficiency, he said. The defence industry will be built up to account for as much as 50% of military spending, from 2% now.