More than three years after Saudi Arabia’s Crown Prince Mohammed bin Salman first raised the idea, oil giant Saudi Aramco announced its intention on Sunday to list shares on the local stock exchange in Riyadh.
That announcement came shortly after the Capital Market Authority approved the offering, setting the stage for what could be the world’s largest IPO ever.
The number and percentage of Aramco shares to be sold will be determined at the end of the book-building period, according to the company’s announcement of its intention to list.
Trading is likely to start in December.
Aramco, which pumps about 10% of the world’s oil, generated the most profit of any corporation last year with net income of US $111 billion, which is more than Apple, Google’s parent Alphabet Inc. and Exxon Mobil Corp. combined.
The company was targeting a US $2 trillion valuation, more than double that of Apple, but is now ready to accept a valuation of $1.6 trillion to $1.8 trillion to ensure the IPO is a success, according to people briefed on the matter.
The sale is key to Prince Mohammed’s Vision 2030 plan to overhaul the Saudi economy and end the kingdom’s reliance on oil exports.
The proceeds from the IPO will boost the country’s sovereign wealth fund, which already has investments in funds managed by Blackstone Group LP and SoftBank Group Corp.
Financial statements for the first six months of the year showed that Aramco’s revenue and profit was higher than any other company’s. It also gives almost all of it back to the government through a mixture of taxes, royalties and dividends.
Of the oil producer’s $46.9 billion profit, $46.4 billion was paid out in dividends.
In an apparent bid to make the stock more attractive, Aramco’s board confirmed plans to pay $75 billion in dividends next year, in addition to any potential special dividends.
The company has considered raising that to $80 billion. At $1.8 trillion that would mean a yield of 4.4%, a decent payout in a low-interest-rate world, but still lower than the 5% Exxon investors currently get.