Question

7 Write a short note on Saudi Aramco IPO? It must cover the reasons behind it and how it could not successful?

Answer 1

In January 2019 Saudi Aramco IPO was introduced, a Saudi Arabia government owned oil company, to fund Saudi Arebia ambitious economic plans.The Saudis postponed the IPO a number of times but management shake ups getting the process moving again.

Saudi Aramco IPO was introduced for the funding to achieve economic plans of Saudi Arabia. It was supposed to generate fund of $100 billion with valuing Aramco worth $2Trillion.But when it began trading in the share market of Saudi Arabia, it raise $26 Billion with valuing the Aramco worth $1.7 Trillion.

Transparency and Geo political concerns caused more downward pressure on Aramco's valuation. The investors valuing the Aramco worth between $ 1.1 to $1.7 Trillions far below the expected worth $2 Trillion. Oil markets were pessimistic about future demand. The oil production in United States was growing rapidly. Aramco's productions costs were much lower than the United States,but a price war to push out U.S. producers would be more painful than helpful for Aramco.