For one thing, Aramco's inner workings are opaque, making its true value a mystery. Then there's the timing. The price of crude oil is near its lowest level in more than a decade. Discussions with Aramco about selling assets in the past had been about much smaller parts of the business, five of the people said. An initial public offering of the entire enterprise had only ever been discussed as a joke, one source said.
The company could be worth anything from $1 trillion (€910bn) to upwards of $10 trillion, which would make it the most valuable company in the world, according to a note from Jason Tuvey at research firm Capital Economics. The last mega IPO from the oil industry was a decade ago, when Russia's OAO Rosneft raised more than $10bn.
Even if Saudi Arabia sells a small stake, a listing could easily surpass that of Alibaba Group Holding Ltd. whose $25bn IPO is the largest on record. Still, Aramco is unlikely to list on the biggest exchanges, according to Bloomberg oil strategist Julian Lee. That would require the government to give investors more detailed information about Aramco's reserves and production capacity, something oil-producing nations consider state secrets, he said.
Facing the possibility of a record-breaking IPO, bankers are fielding frantic phone calls from head offices asking why they didn't know this was coming and are preparing to spend the weekend figuring out how serious Salman is, two of the people said.
Aramco said it could sell a portion of its shares or a bundle of its subsidiarie.
By: Dinesh Nair and Ruth David.
Review: Emerging Market Formulations & Research Unit, Flagship Records.
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