Saudi Arabia began an initial public offering Sunday of a sliver of oil giant Saudi Aramco after years of delay, hoping international and local investors will pay billions for a stake in the kingdom's crown jewels, reports the AP. An approval by Saudi Arabia's Capital Market Authority served as the starting gun for an IPO promised by Crown Prince Mohammed bin Salman since 2016. But unlike traditional IPOs, Saudi Aramco offered no hoped-for price range nor idea how much of the firm would be offered on Riyadh's Tadawul stock exchange. Analysts say the kingdom likely hopes local investors will push share prices toward a desired $2 trillion valuation and buoy that price ahead of any further listing abroad. Saudi Aramco made a point in its filings to highlight its profitability and low costs through data once held as a state secret by the royal family, euphemistically referred to as its "current shareholder."
However, economic worries, the trade war between China and the US, and increased US crude oil production have depressed energy prices. A Sept. 14 attack on Saudi Aramco spooked some investors, with one ratings firm already downgrading it. It's hard to overstate Saudi Aramco's power: It produces over 10 million barrels of crude oil a day, some 10% of global demand. The firm's net income in 2018 was $111.1 billion, far beyond the combined net income of oil giants BP, Chevron, Exxon Mobil, Royal Dutch Shell, and Total SA. Al-Arabiya reported last week that pricing for the stock will begin Nov. 17. A final price will be set Dec. 4, with shares beginning to be traded on the Tadawul on Dec. 11. Analysts say a $2 trillion valuation—Apple and Microsoft are $1 trillion each—may be a stretch. By announcing the start of the IPO on Sunday, Prince Mohammed may have been convinced to take a lower valuation in order to get the IPO moving.
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