Saudi Aramco's huge IPO would be able to get ahead of AliBaba's IPO by a huge margin.
Alibaba would no longer be known for having the largest IPO. An IPO of just a part of Saudi Aramco would compete with the offering of Alibaba as the largest in history, creating a windfall to underwrite banks but the state-controlled oil company is still facing a number of issues, analysts told.
The estimation of the Saudi organization’s total value is at $1 trillion to $10 trillion, as it is controlling the second biggest crude reserves of the world. By comparison, the leading state owned oil company ‘Exxon Mobil’ is having a market capitalization of around $310 billion.
Based on the lower level estimate of Aramco, an offer of even a 5% share will succeeded in raising $50bn – 100% greater than what the Hangzhou based company raised 2 years ago. Agricultural Bank of China’s second biggest IPO in 2010 received $19.2 billion.
Among leading American IPOs, Facebook received $16bn 4 years ago and Visa raised $17.8bn 8 years ago. Analyst at Renaissance Capital, Tiffany Ng, emailed to IBD, "The Aramco IPO would easily be the largest IPO ever and will more likely consist of certain subsidiaries rather than the whole company.”
Defense Minister and Deputy Crown Prince of the Kingdom of Saudi Arabia, Muhammad Bin Salman, spoke to the Economist recently that 5% of the Arabian company can be initially offered in Saudi Capital Riyadh, with more in later times. A decision regarding the offer might be taken "the next few months."
Many have speculated that the IPO will focus on the company’s subsidiaries, refining operations or joint ventures, but the listing of the major enterprise, which earns most of the government revenues and plays an important role for setting the international oil markets tone, is also likely.
"We are considering a listing at the top," Chairman of Aramco ‘Khalid al-Falih’ spoke to the Wall Street Journal on January 11, 2016 indicating "a listing of the main company, and obviously the main company will include upstream," referring to production and exploration assets.
Global financial giants that have seen fees of investment banking cut down by 8% in 2015 are eager for reaping a hefty payback from Aramco. Citigroup, HSBC, Deutsche Bank, and JP Morgan Chase have all been working with Aramco previously and would probably become large contenders in every IPO.
JP Morgan’s stock closed up at 0.2% on the stock market on January 13, 2016. Citigroup went up by 0.1%, whereas HSBC climbed up by 0.5%. Alibaba rallied by almost 4% and Exxon Mobil edged up by around 2%.
The stock market of KSA will not be able to easily absorb the size of Aramco, which means that it might need to enter deeper markets like Hong Kong, New York or London, said Tiffany from Renaissance Capital.
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