According to estimates of BMI Research, in case the Saudi Aramco IPO does not bring the desired funds, the project to diversify the kingdom’s economy will not develop as planned.
Meanwhile, investors expect a successful IPO. "The IPO will become the litmus test of foreign investors' confidence in Saudi Arabia. The IPO’s success will be crucial in determining the kingdom’s economic and political trajectory over the next decade,” BMI Research’s report said.
The IPO is planned to be held next year on the TADAWUL domestic exchange and in another exchange. Last year, the "Vision 2030" plan was developed. It is aimed at boosting Saudi Arabia’s economy. However, experts note that the kingdom’s dependence on fossil fuels makes it too vulnerable to oil and commodity markets’ fluctuations. Thus, diversification is needed as soon as possible in case Saudis continue to finance subsidies and social services at existing levels.
Saudi Arabia will have full control over Aramco’s oil wells and production even after selling 5% of state stock. The sale of 5% of the shares could bring no less than $25 billion.
The kingdom’s authorities plan to hold Saudi Aramco’s IPO in the framework of Crown Prince Mohammed bin Salman’s plan to establish the world's largest sovereign investment fund and to reduce the economy’s dependence on hydrocarbons.
