Saudi Aramco, the world’s biggest oil producer, changed its legal structure to a joint-stock company this month, in preparation for their 5% initial public offer (IPO) plans.
“This is one of the key steps they need to take to allow third party investors through the door and this is probably one of the most significant milestones when it comes to the actual IPO process,” said Oliver Shutzmann, chief executive officer of Iridium, a Dubai investor relations firm.
If Saudi Aramco were to sell a 5% stake valued at US$100 billion, it would give the company a $2 trillion valuation, worth more than Apple, who is currently the world’s largest publicly traded company at more than $900 billion.
According to financial experts, the next step for Aramco will be to issue a prospectus, this will detail where the listing will be held and other financial details. It is still not confirmed as to where the listing will be located, however, they are considering a dual listing between London, New York and Hong Kong, and an additional listing on Tadawul, the Saudi stock exchange.
“They will have to choose the listing venue before doing the real detailed prospectus because each jurisdiction will have its own different requirements for disclosure but they are all relatively high,” said Andrew Tarbuck, partner at Hogan Lovells, an international law firm.
The MENA region released 5 IPOs in the third quarter of 2017, compared to 1 in the same time period the previous year. According to EY, with the recovery of oil prices, more offerings can be expected.
The stake sale of Aramco is part of a series of greater measures made by the Saudi government to decrease costs and increase revenues in the Kingdom. The privatization drive is one of them, as well as reducing energy subsidies and implementation of new taxes such as value added tax.
Saudi could earn up to SAR 80 billion from non-oil revenues in 2018 after the introduction of VAT, the expat worker tariff and the possible introduction of a levy on luxury goods.