Why Did Saudi Arabia Take Aramco Public with a $2 Trillion IPO?

While investors were watching Apple flirt with $1 trillion, Saudi Arabia decided to take Aramco public. The result became the world’s largest IPO and a company that became the most profitable in the world.

What is unique about this decision is that Saudi Arabia didn’t engage in international exchanges. That means any notable developments from this effort will stay contained domestically. 

The goal of this effort was for the Saudi government to start raising money. Selling off a 1.5% stake in the company helped to raise over $25 billion. As oil prices stay low, deficits continue to rise in this country as it desperately attempts to diversify its economy. This action helped to stop the financial bleeding.

87% of Saudi Arabia’s Income Comes from the Petroleum Sector

Aramco is still a state-owned enterprise. All of the money investors put into the company won’t change the fact that 98.5% of it remains owned by the government. 

The new shareholders will now have a way to voice concerns about how the organization gets managed, but they’re going to take a backseat to the decisions made through government policies.

Some investors believe that the move to take Aramco public is a way to demonstrate that the national oil company wants to become a global energy provider. The IPO does open some doors to expand into Asia, where oil demand could skyrocket in the coming years.

There could be new opportunities to reach North America in the future under this new structure. Americans are a prime target for energy investments since this country, which contains about 5% of the global population, consumes one-quarter of the energy people use each year.

Should Americans Invest in Aramco?

Aramco already owns the Motiva Enterprises plant in Port Arthur, TX. It is the largest oil refinery in the world, and tech centers in Houston and Boston supplement these efforts.

Can everyone invest in Aramco now that it is public? Outside of Saudi Arabia, the easiest way to get a piece of this company is to own mutual fund shares from emerging market fund indices. The government is also considering listing on international exchanges in Tokyo, China, and Russia. Instability in the Middle East could make it a volatile equity solution for investors with access to these markets who want aggressive diversification. 

It will not come to the United States because of the threat of lawsuits from 9/11 families.