It's been more than three years since Saudi Arabia announced its plans for a potential initial public offering (IPO) of state-owned Aramco. Since then, the planned listing has been delayed multiple times, but it seems as though the plans may actually fall through very soon.
Aramco, the world's most profitable company, reportedly held talks with a number of investment banks to discuss their potential roles once it has finalized its merger with Saudi Basic Industries Corp (Sabic). Last year, Aramco bought a $69 billion stake in the petrochemicals giant. Sources told Bloomberg that Aramco is waiting till the Sabic acquisition is complete before moving forward with the IPO. The kingdom aims to raise a record $100 billion from selling a 5 percent stake in the state-owned oil giant, which would make it the biggest IPO in history.
On Tuesday, Saudi Arabia's Energy Minister Khalid Al-Falih said officials plan to list the company sometime within the next two years.
Earlier this year, Saudi Aramco confirmed its status as the most profitable company after disclosing its financial data for the first-time ever. The state-run oil giant announced it made $111 billion in profit in 2018. Thus, it beat the likes of American tech company Apple Inc., which made a profit of $59.4 billion during the same period.
According to CNBC, Saudi's national petroleum and natural gas company made more money than four corporate giants combined. These include J.P. Morgan Chase, Google-parent Alphabet, Facebook, and Exxon Mobil. Together, these companies made nearly $106 billion in 2018.
The disclosure of financial data came after the company's much delayed public offering, which was first scheduled to take place in 2018, then again in 2019. Now it's been said the listing is scheduled for 2020-21.
Al-Falih said the planned float "was never fully suspended," despite media reports in 2017 that claimed otherwise.
"We have always been clear that the IPO will happen in the 2020-21 timeframe. We have never stopped talking about the IPO."
Why is Saudi Aramco going public?
Low oil prices have hit the Saudi economy hard, forcing the kingdom to cut subsidies and strive to diversify its oil-reliant economy. A 2016 report suggested the kingdom will fall into an economic recession in 2017 for the first time since 1999. Although 2016 turned out better than experts expected, the kingdom still ran a deficit, forcing it to dig deep into its massive foreign reserves.
An IPO (Initial Public Offering), which is the first time the stock of a private company is offered to the public, was meant to be a step forward for the kingdom. Crown Prince Mohammed bin Salman's ambitious Vision 2030 pushed for major economic reforms in the kingdom, and the announcement of the partial sale of Aramco was included in it. As part of the wider plan, the kingdom announced 20 percent pay cuts for all ministers and 15 percent pay cuts for Shura Council members in 2016.
Bonuses and other perks were also targeted by the reforms, and sales taxes have been introduced. More than two-thirds of Saudis work in the public sector, with the kingdom spending roughly 45 percent of its budget, or $128 billion, to pay their salaries in 2015. The kingdom also sold $17.5 billion in debt in 2016. This was the largest-ever bond sale from an emerging market. The sale was hailed as a major success for the world's top oil exporter, as it attracted investor interest totaling $67 billion, nearly four times the amount of the sale.