Reported today on The Seattle Times For the full article visit:
Saudi Aramco is the world's most profitable company - but its IPO is risky. Here's why.
Saudi Arabian Oil Co., or Aramco, invites many superlatives. It is the world's largest oil company, accounting for about 10 percent of global production. Last year, it was the world's most profitable company, far surpassing the earnings of companies such as Apple or JPMorgan Chase.
It's also beset by risks, as the company lays out in a 658-page prospectus announcing its planned share sale, which is set to culminate Dec. 5. Fears about climate change could reduce demand for oil and increase the odds of Aramco getting sued, the company warns. Terrorist attacks and armed conflict also loom large, the company cautions, detailing several drone and missile strikes on its facilities this year, one of which briefly knocked out more than half of its oil production.
And with the kingdom planning to hang onto more than 98 percent of the company, minority shareholders face the risk that the government may lean on Aramco to spend money in ways not "consistent with the company's immediate commercial objectives," the prospectus warns.
Aramco says it plans to sell a 1.5 percent stake on the Saudi Stock Exchange in Riyadh, at a price in the range of $8.00 to $8.50 a share. That would raise roughly $25 billion, giving Aramco a total value of up to $1.7 trillion – less than the $2 trillion or more Saudi Crown Prince Mohammed bin Salman said the company was worth in 2016.
A year after some financial institutions briefly gave Saudi Arabia the cold shoulder over the savage murder of Washington Post contributing columnist Jamal Khashoggi, Western banks have flooded back to work on the IPO. Aramco has hired 28 banks to assist with the sale, including Citigroup, JPMorgan, Goldman Sachs and Morgan Sta
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