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What To Expect When The Biggest Oil Company In The World Goes Public


Saudi Aramco, the Saudi, state-owned oil company, is set to go public next year. It is such a lucrative company that a decision to sell shares in just 5 percent of it has excited the heads of stock exchanges and energy watchers around the world. Noel King from our Planet Money podcast tells us why.

NOEL KING, BYLINE: Why are people so excited about this IPO? Well, we know that Saudi Aramco is the biggest oil company in the world by a lot. We know the IPO, predicted to raise $100 billion, will be the biggest in history by a lot.

Here's what we don't know. How much oil does Saudi Arabia have? Is Aramco really worth $2 trillion, as the Saudi government claims? Aramco has never had to answer these questions. A private company gets to keep things private. But when a company goes public and has to answer to investors, it has to be transparent. So Saudi watchers were astonished last year when Crown Prince Mohammed bin Salman hinted in an interview with The Economist that Aramco would go public.

SAMANTHA GROSS: My first thought was, does your daddy know you're doing this (laughter)? I was completely shocked.

KING: Samantha Gross is an energy expert with the Brookings Institution, a DC think tank. She says Aramco is a family company in the truest sense. Aramco is owned by the Saudi government. Saudi Arabia is a kingdom. The government basically is the royal family. There are thousands of princes, each of them getting a cut of the oil money. But nobody really knows how much.

GROSS: The way the funding sort of flows out into the royal family - yee (ph). It's somewhat of a mystery, the amount of money that goes to the various royals and how they're funded.

KING: So why would Saudi Arabia do this - open Aramco's books, expose its secrets? Ellen R. Wald, author of the forthcoming book "Saudi, Inc.," says that comes back to the crown prince who first hinted at the IPO. Mohammed bin Salman is next in line to the Saudi throne.

ELLEN WALD: He's reportedly a workaholic. He likes to work all the time. He has a lot of ideas, and he's got a lot of power.

KING: And crucially, MBS, as the crown prince is known, is very, very young, only 31 years old. He recognizes that Saudi's economy is highly dependent on oil. Oil prices are unstable. He wants to diversify. Saudi Arabia will invest the money raised by the IPO in other industries, like manufacturing and tourism. And for all of the secrecy around Aramco, Ellen R. Wald says the company is reportedly very well-run.

WALD: It's said in Saudi Arabia that if you want something to get done and you want it to get done efficiently and within budget or under budget, you call Aramco because they can get it done.

KING: Aramco isn't just an oil company. It builds sports stadiums and shipyards, among other things in Saudi Arabia.

The last big question is, on which stock exchange or exchanges will Aramco be floated? We know that it'll list on the Riyadh stock exchange. But other exchanges are fiercely competing for a share - New York, London, Tokyo, Hong Kong, Singapore. A delegation from the New York Stock Exchange reportedly visited Saudi Arabia in late May, not long after President Trump's visit to the country.

Here's Samantha Gross from Brookings.

GROSS: This is going to be the world's largest IPO. It's prestigious for the exchange. Also, there's a lot of money to be made by the bankers who are facilitating this IPO. So there's definitely a competition.

KING: But for all of the excitement, remember, we expect only 5 percent of Saudi Aramco will be made public. The vast majority of the company will remain in Saudi control.

Noel King, NPR News.

(SOUNDBITE OF ADAM YOUNG'S "THE PILOT") Transcript provided by NPR, Copyright NPR.