Aramco pulverizes Apple, Microsoft and Amazon in stock market value at the last minute of the glory of fossil energy
Impulsive Prince Mohamed bin Salman is better off not to be wrong. About four years ago he estimated the value of the crown jewel, Aramco, at $2 trillion. The world has gone around a lot, but within two days of the IPO of 1.5% of the Saudi oil company, the extrapolation was exactly that, allaying the slight frustration of the exit valuation by 1.7 trillion.
So Aramco is not only the most profitable company in the world but also the most valuable. As the Saudi heir wished, his IPO has attracted more capital than anyone in history, $ 25.6 billion, beating Alibaba’s record five years ago. To give an idea of its astronomical value, it is enough to say that it exceeds Apple, Microsoft, Alphabet or Amazon by more than 50%. Also, in a single stroke, Aramco has placed Riyadh’s stock market among the ten most capitalized in the world, ahead of Bombay or Toronto.
But to say that everything has gone out to ask for it would be excessive. To begin with, Aramco has not taken out the 5% that had been initially shuffled – afterwards reduced to 3% – but only 1.5% (in its two thirds, for institutional investors of the Arabian peninsula). Secondly, the IPO has been delayed more than a year, after successively ruling out as launching places to New York, London and Hong Kong, for different reasons, until staying at home. It has been an IPO “for family and friends”, in the words of the minister of the branch. And internationalization has remained at most regionalization.
Aramco is no mirage; produces one-tenth of the world’s oil
However, Aramco is no mirage. It produces one tenth of the world’s oil. But international investment banks did not get answers to several elementary questions. Although the IPO brochure has been the greatest transparency exercise in its history, the opacity continues. The president of the council of Aramco was relieved in September for his doubts – then he also worked as an energy minister – but his substitute for all trust is also from the fabulous Saudi sovereign fund. And the new Minister of Energy is a brother of Bin Salman. For all of the above and more, some consider an Aramco valuation of between $1.2 trillion to $1.5 trillion more tightly.
They will have some reason since until just over five years ago there would have been stabs among investors for getting a share of Aramco. But at the moment of truth, there have not been three offers for every action. The IPO has had to be thoroughly underpinned by private and, above all, public money from the kingdom – two trillion dollars from the State itself – as well as from other Gulf allies, in addition to a ubiquitous patriotic-advertising campaign on each fence and screen of the kingdom.
That for small private investors. For the great fortunes, the Saudi regime has more expeditious methods, as Bin Salman demonstrated with his golden kidnapping in the Ritz of Riyadh of dozens of princes and businessmen. The international segment of the IPO, scheduled for 2020, is not closed. Fears of a global recession – now softened – precipitated the IPO’s saudization before the end of 2019.
The kingdom underpins an IPO with public and private capital that eventually remained at home
As a corollary, after the sprint of the first three sessions, in the following three the price lost a third of these advances. Because spring was Arabic, but autumn is worldwide. In addition to the global economic slowdown, the weight of energy companies has been drastically reduced in most exchanges, due to indications that global hydrocarbon consumption could reach a ceiling in ten years.
Then it will stabilize, before starting to decrease. Regulatory measures resulting from the awareness of climate change, pollution and the clamour for clean sources of energy play against producers. Although to keep standing while others fall – their extraction is the cleanest and cheapest – Aramco does not stop investing in large consumer companies, especially in less green Asia, in order to ensure captive markets. For example, the Reliance plastics division in India. Or this December, with the acquisition of 17% of the Korean Hyundai Oil Bank.
In any case, Aramco, originally Arabian American Oil Company, records record figures despite the 10% daily revaluation cap to achieve the goal set. Its IPO was set on December 11, since 11 is a fetish number for the monotheism of which Saudi Arabia is considered guardian – as they well know in New York, where Aramco had its headquarters for years. That the profit declared last year out of 111,000 million dollars goes into the same logic.
Although still testimonial, the privatization of Aramco adds to the change in the cycle that began with the US and British invasion of Iraq, which forcibly reversed the nationalization of Iraqi crude under Saddam Hussein thirty years earlier. However, to appropriate the story, at a time of turmoil for the region, the operation has had a different character than several advisers had suggested. We must not forget that in the strategic rival of Saudi Arabia, Iran, hydrocarbons were nationalized by the Islamic Revolution – which forced the culmination of nationalization in Saudi Arabia itself, which was being compensated by Washington with tax exemptions and by Riyadh, on the other hand, with stratospheric US arms acquisitions, to this day.
The IPO was set on day 11, fetish number for Saudi monotheism
The IPO has been shaken in its latest stages by current affairs and long-term valuations. In September, the impotence of American batteries to protect two of Aramco’s plants – sinking production – left the world speechless and discovered the dangers of playing with fire in the Persian Gulf. Earlier there were sabotages to their pipelines. Although the high-precision attack with a swarm of drones was claimed by the Houthi guerrilla that controls northern Yemen, Riyadh rushed to blame Iran.
However, on the eve of the IPO, a UN report announced that it had not found any evidence that corroborated the accusation. On Wednesday, the IPO, incidentally, the station of the high-speed train, Mecca-Medina, was reopened, which last September suffered a dreadful fire whose origin has not been explained.
This is also the time when Saudi Arabia has reopened the door to the United States Army, which in 2003 and without making any noise left the kingdom, as demanded by Al Qaeda. Until then it occupied the base of Dhahran – among others -, where Aramco has its headquarters, a city within the city.
Finally, Aramco is the atomic bomb of the Saudi royal family, with which the world economy can shake. As the company owes its investors, it will be a less discretionary use fuze.