WHEN $25.6B IS
M ost companies would be thrilled to in history – like Aramco, Saudi Arabia’s state- controlled oil company, did earlier this month. But Aramco isn’t like most companies. And Crown Prince Mohammed bin Salman, the de facto ruler of Saudi Arabia, has good reason to be disappointed with what was one of the biggest IPO flops ever. Aramco’s IPO wasn’t doomed from the start... Bankers who were willing to state the obvious – the analytical equivalent of “the sun is big and hot” – could have prevented the stench of failure from being forever attached to Aramco. And it would have helped if MBS, as bin Salman is sometimes called (though raise $25.6 billion in an initial public offering... especially for the biggest IPO
THE 800-POUND GORILLA On the surface, Aramco’s IPO looks like a smashing success. The company instantly became the world’s biggest public company, with a market capitalization of $1.7 trillion. (Apple (AAPL) comes in at No. 2 with $1.2 trillion.) It’s the most profitable company in the world, with a 2018 net income of $111 billion. That’s twice the net income of Apple... and five times more than global oil major Exxon Mobil (XOM). Aramco is the world’s largest energy company. It accounts for an incredible 10% of global daily oil production. (The entire U.S. produces 18% of the world’s oil). It has more reserves than Exxon Mobil, Chevron (CVX), Royal Dutch Shell (RDS-A), BP (BP), and Total (TOT) combined. When Aramco sneezes, the world’s energy market – which
probably not to his face), didn’t have a predilection for murder and mayhem.
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December 2019
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