On Oct. 2, Saudi Arabia’s state-owned oil producer, Saudi Aramco announced plans to go public in what could be the largest initial stock offering ever. The decision marks not only a significant milestone in the history of the company, but is also a sign of progress towards Saudi economic growth.

Saudi Aramco is the world’s most profitable company. In the first half of 2019, it [reported] (https://www.thenational.ae/business/energy/9-things-you-need-to-know-about-the-saudi-aramco-ipo-1.932603) a net profit of 46.9 billion USD, which is higher than that of Apple, Google and Amazon, as well as revenue of 163.9 billion USD. In 2018, the company reported a net income of 111 billion USD. Saudi Aramco’s Initial Public Offering (IPO) could surpass [Alibaba’s listing] (https://www.nytimes.com/2019/11/03/business/dealbook/aramco-ipo.html ) in 2014, which made history by raising $22 billion in a single day.

Initially, the company will opt for a local listing in its domestic stock exchange, Tadawul. Yasir Al Rumayyan, Chairman of Saudi Aramco, said on Sunday that other listings in foreign locations will be considered in due course. The listing is expected to begin next month; however, the date and other details have not yet been specified. Al Rumayyan also reported that the percentage of shares and the price will be determined in the coming weeks. The company’s valuation is currently expected to range around [$1.5 trillion.] (https://www.nytimes.com/2019/11/03/business/dealbook/aramco-ipo.html). This would make Saudi Aramco the most valuable public company in the world — a title currently held by Apple.

Foreign investors, GCC nationals and Saudi citizens will be able to take part in the IPO. The company is offering Saudi family businesses and nationals a bonus share for every 10 shares held for 180 days, with a limit of 100 shares. The percentage of local to international investors will be determined after the company’s roadshows and book-building exercises.

In essence, ARAMCO’s move toward being a public corporation is a play in power dynamics as Saudia Arabia’s economy continues to grow. The Aramco IPO is essentially a big step towards the Kingdom’s Vision 2030, which seeks to diversify the economy away from oil. The majority of the proceeds from the IPO will likely flow into Saudi’s Public Investment Fund to be used to restructure the economy by financing new projects in non-oil sectors. Saudi Aramco lined up many big-name banks, such as JP Morgan, Goldman Sachs, Morgan Stanley and Bank of America, to be underwriters of the deal. The sale will generate publicity through these big name banks and provide a further financial boost.

The recent Aramco drone attacks demonstrated vulnerability on the Kingdom’s part as it disrupted more than five percent of the global oil supply and shut down 5.7 million barrels of production. Professor Georgi Derlugian, who teaches a core colloquium called “Oil”, highlighted that “getting big foreign interest involved in the affairs of the country [means gaining foreign protection and allyship]. So, if something happens to the country, a lot of important people outside will notice.”

Dr. Adam Hanieh, a professor at the University of London who studies the political economy of the Middle East, further emphasized the significance of the IPO: “Having it succeed is important for [Mohammed Bin Salman’s] authority. So, the fact that he can push this through is very [much] linked to his status as a ruler.”

Saudi Aramco’s IPO will play a key role in achieving the kingdom’s goals and making its Vision 2030 a reality. It is apparent that we are entering a new era of national oil companies with companies like Saudi Aramco leading the way. It is yet to be seen if an IPO will be in ADNOC’s, the UAE’s national oil giant, future in light of this decision.