Saudi Aramco, one of the leading oil-producing company in the world, which pump around 10% of global oil production. In 2018, it was the world’s most profitable company, as compared with the earnings of other companies such as JPMorgan Chase. The company pumped around 10.3 barrels’ crude oil in a day in 2018. Last year, the liquid petroleum reserves of Saudi Aramco were around five times larger than the joint reserve of Royal Dutch Shell, Total, ExxonMobil, Chevron, and BP.
This year company planned to sell its 2 to 5 % stake on the Saudi Stock Exchange in Riyadh with a price range of around US$ 8.0 to US$ 8.5 per share. One of the risk factors is that after initial public offering (IPO) the company may face some difficulty to lift dividend payout to attract investor. Additionally, the company faces problems due to the fluctuation of oil prices and various other geopolitical risks. Furthermore, the company recently reported a drop in its net profit of around 18% to USD 68 billion, owing to a decline in oil prices for the nine months, which ended in September from the same period previously. Some of the other risks which can be associated with Saudi Aramco IPO are the amount of shareholder which are high as compared with the Saudi government, a dominant company shareholder. If the company sells its stake as per their decision, then the majority of the stake will be with the state. This implies that the state will remain as a main shareholder with a stake between 95% and 98%.
Due to this, the private shareholder would face difficulties if some risky decisions and operations are taken. These factors may create an adverse impact on the private shareholder. Additionally, until 2030, Asia is expected to account for around 41% of global refined petroleum demand which may drop as the demand for electric vehicles will upsurge. Apart from all these risky facts, Saudi Aramco is expected to become one of the largest company in terms of revenue if they export their final product to the west region of the world in the upcoming year. Though, its present, as well as future business, mostly depends on the market condition of Asia as the company export around 70% of its final product to different Asian countries.