United States: Aramco’s possible IPO in the NYSE

The Saudi Arabian company is 6 times bigger than Apple

Aramco  IPO 

Leer en Español: EE. UU: Posible IPO de Aramco en la bolsa de Nueva York

Donald Trump proposed to Aramco’s CEO Amin Nasser to make an IPO in the New York Stock Exchange. The move is part of the presidential ongoing 12-day Asian diplomatic circuit alongside big names in finance, such as Goldman Sachs’ CEO Lloyd Blankfein.

Aramco

Saudi Aramco is the Saudi Arabian Oil Company; the Saudi royal family’s enterprise focuses its current operations in the oil and gas industry. Founded in 1933 as the California-Arabian Standard Oil Company, the enterprise is the most valuable company in the world with a median valuation of 6 trillion dollars. Apple Computer Inc. is, at least, 6 times smaller.

The Dhahran based company surpassed 65,200 employees and has oil reserves around 200 billion oil barrels; 12 million are produced on a daily basis. By 2020, Saudi Aramco strives to become a global leader in integrated energy and chemicals; a profit driven company with a recently acquired eye for sustainability and a future source for market diversification.

Aramco’s leadership as the largest oil and gas Company in the world rests upon five pillars. First, the company aims to reinforce its leadership in oil and gas exploration and production with a focus on an increased gas sector. Second, boosting its trading and marketing businesses though the hydrocarbon value chain. Third, acknowledging its position as a monopsony for the Saudi Arabian people.

Both the fourth and fifth pillars at Aramco correlate heavily with the company’s $455.49 billion dollar reported revenue in 2015, which grants great acquisitive power to the corporation. The once Rockefeller-owned establishment is compromised with reinvesting its profits towards CO2 emissions and water resources. Religion isn’t relevant when business prevails.

New York Stock Exchange IPO

Also known as The Big Board, the NYSE is New York’s market for stocks. During the average work day over at NYSE, more than $170 billion dollars in assets will be traded, allocated in companies whose total market capitalization surpasses the $20 trillion dollar mark. Owned by Intercontinental Exchange, the stock market was founded in 1817 and remains as the decisive ground where the Dow Jones Industrial Average, the S&P 500, and the NYSE Composite shape itself.

A stock is a private ownership of a company; the percentage of the company is acquired through the payment of said right. An investor, anyone buying the stock, expects the company to grow so his/her stock will increase in value.

An IPO into the NYSE means an Initial Public Offering into the open market. Anyone with a company with a shareholder equity over $4 million dollars, 750,000 pre tax income in up to three fiscal years, and 800 public shareholders and 500,000 shares publicly held or 400 public shareholders and 1 million shares publicly held or 400 public shareholders and 500,000 shares publicly held with an average trading volume of 2,000 shares for 6 prior months for a unitary price of 3 dollars can issue common stocks through the NYSE.

Opportunities behind Aramco’s IPO in the NYSE

The U.S. will probably face a market correction in 2018. It means that the low interest rates from the Federal Reserve have led to an investment frenzy that has put the American economy back on track. Nevertheless, this hikes in the overall American economy are fuelled by credit, which will become costlier so defaults are expected. Defaults destroy capitals, which lead to market deceleration.

An IPO from the world’s largest Oil Company would mean a safe investment if Saudi Arabia’s royal family keeps their good work practices. Investing in foreign companies hedges the risk of local downturns in the Americas, which seems like a responsible investment towards the effects of the sustained rate hikes during 2018.

 

Latin American Post | David Eduardo Rodríguez Acevedo

Copy edited by Susana Cicchetto

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