Share price on offer between 30 and 32 Riyals values Aramco between $ 1.6 trillion to $ 1.7 trillion. With 1.5% of shares on offer IPO is expected to be around $ 24.3 billion to $ 25.9 billion. If it hits beyond $ 25 billion then Aramco will be the world's largest IPO till date (Currently Alibaba holds the records at $ 25 billion). Let us wait till December 4th to see if this happens.
Aramco wants to make it really really big eyeing at a valuation of $ 1.73 trillion with the next highest market valuer being Apple at $ 1.14 trillion. This is real big though initially Aramco valuation target was around $ 2 trillion. However international investors are valuing Aramco at around $ 1.5 trillion.
Why Aramco's IPO gets so much prominence? It is because this IPO tries to change course of Saudi Arabia's economy which primarily depends on oil currently. Saudi Government plans to use the proceeds of this IPO to invest in non-oil related industries, like tourism, technology, entertainment sector etc to create jobs in Saudi Arabia and diversify away from oil.
Challenges to this IPO are drop in oil prices, global warming and its related impact due to fossil fuel are some of the major ones. These challenges have veered away Western investors who show little interest in this IPO, forcing Saudi Arabia to concentrate on local investors and its major customer bases like China, Malaysia and Japan.
Let us look at oil prices for the past 2 years, definitely it is not in favour of Aramco and there is still no upward outlook on oil atleast in near future.
As per reports in the first 5 days of offering the IPO had garnered around $ 19.5 billion. Question is whether it will cross $ 25 billion? My view it will cross $ 25 billion and will become the largest IPO in the world, considering the importance attached to it for the Saudi Government and secondly given the intense interest of the local Saudi people in the IPO. Lastly there is also a "Green Shoe" option which will be exercised by Aramco underwriters (this was also instrumental in Alibaba getting to its $ 25 billion) should there be a shortfall in the IPO.
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