Saudi Arabia’s Crown Prince, Mohammed Bin Salman is consistent in his vision to modernize the conservative Kingdom, open its closed foreign policy, and diversify its oil-dependent economy. The IPO of the Kingdom’s Saudi Arabia Oil Co. (Saudi Aramco) is one of the key elements of the Crown Prince’s reformations and it is currently one of the biggest news in global financial and economic circles.
Saudi Arabia is getting ready to sell 1.5% of Saudi Aramco in an IPO that is set to raise about $25.6 billion to become the world’s largest IPO. The title of the world’s largest IPO had been held by Alibaba’s $25 billion IPO until now, but the listing of Saudi Aramco’s shares is set to rewrite history.
Introducing Saudi Aramco
Saudi Aramco is not just another oil company, it practically powers the Saudi Kingdom and the company could as well be the heartbeat of the socio-economic and political outlay of the Middle East.
Saudi Aramco is the world’s largest oil producer, it pumps about 13% of the global oil supply and it employs more than 76,000 people. It is also the most profitable company in the world. In 2018, its revenue was $355.9 billion, and it had a net income of $111.1 billion. The total value of its assets in the first nine months of 2019 was about $388.6 billion. It posted half-year profits of $46.9 billion in the first two quarters of 2019, which is more than the combined profits of the next six oil companies.
The global oil industry is gradually returning to winning ways after a supply glut tanked oil prices for much of the second half of 2018. In the year-to-date period, the price of Brent Crude has climbed 19.63% and the West Texas Intermediate is up 24.79% as seen in the chart below.
A public listing is becoming a reality
In 2016, the Crown Prince hinted at the public listing of Saudi Aramco with the hopes of raising about $100 billion to fund his reformative economic agenda. The last few years have seen a series of false starts, review of the valuation, and recalibration of expectations and now, the IPO is happening. The Saudi government has revealed that it plans to sell 0.5% of the shares to individual subscribers while the rest will be sold to domestic and qualified foreign institutional investors.
The offering period for retail subscribers lasted from November 17 to November 28 while the offering period for Institutional subscribers ends on December 4. The Wall Street Journal reports that 4.9 million Saudi’s out of a population of 34 million have subscribed for $12.6B worth of Saudi Aramco shares. Institutional subscribers have applied for $31.7 billion worth of Saudi Aramco shares and the orders could surge in the next few days.
The public sale of the company begins with a domestic listing on Saudi Arabia’s Tadawul Stock Exchange but the listing on international exchanges will not happen until after a year. It is still unclear if the international listing will happen in the US, London, Hong Kong or a combination of the global exchanges.
Traders and Investors will be able to buy Saudi Aramco stock (SAOC) on eToro once proper liquidity is unlocked but you can include the stock in your watchlist in the meantime. Once, the IPO is completed, you should be able to trade Saudi Aramco on eToro just like you would trade any other asset.
Yasir al-Rumayyan, the chairman of Saudi Aramco, observes that the IPO “marks a significant milestone in the history of the company and important progress towards delivering Saudi Vision 2030, the kingdom’s blueprint for sustained economic diversification and growth.”
eToro provides access to Saudi Aramco
For people interested in getting a piece of the Saudi Aramco pie, online trading platform eToro is one of the first brokers in the world that provides clients with access to Saudi Aramco stock. On eToro, you can access the Saudi Aramco Stock through Contract for Difference (CFD) trading instrument. CFDs provide you with an opportunity to profit from uptrends or downtrends in the price of an underlying asset without requiring you to own the asset in the traditional sense of equity ownership. Since Saudi Aramco’s stock is yet to make its debut on international stock exchanges, trading CFDs on eToro is the next best option for interested traders and investors.
If you want to trade Saudi Aramco stock, you’ll need to open an eToro account and fund the account using your preferred funding method. Opening an account on eToro is free and you’ll also be given a virtual account with $100,000 which you can use to test your trading knowledge and expertise before committing real money to any trade. eToro’s virtual account simulates the real market and it provides a more immersive learning experience than reading stock trading guides or watching stock trading tutorials.
Potential tailwinds and headwinds to Saudi Aramco stock
Saudi Aramco is the biggest oil company in the world and the demand and supply dynamics of the global energy market will have an impact on the performance of its stocks. When oil prices rise, its revenue could see an uptrend and a reduction in global oil demand could trigger a supply glut that will hurt its financials. More so, Saudi Aramco’s location in the Middle East and the geopolitical tensions of the region could also subject the stock to more volatility than the stock of oil companies in the West.