Saudi Aramco is a Saudi Arabian company that produces and sells petroleum and natural gas. In December 2019, the Saudi Arabian government sold between one and two percent of the company in the Tadawul stock market from Saudi Arabia. In other words, that’s 45,000 million USD in just one company.
Since big numbers are not easy to manage, you can get a better idea if we say that the amount is more than Apple and Microsoft together.
Should we run and buy?
We will never know until is too late because that is the way the market works. However, we have some insights that can help you make a decision.
Why you should run and buy
For example, this company produces around 10 percent of the full world’s petroleum production. They have reserves for about 52 more years.
Based on 2018 results, it was named the most profitable business in the world, with profits of $111.1bn (£84.7bn). Consider that other giants like the U.S. firm Exxon Mobil just made $21bn.
The company has stated that the government will decrease the taxes it has to pay and that the Saudi Arabian state may step down from getting a part of the dividends so the new investors will benefit more.
Why you should wait and see what happens with your money in your pocket
It is hard to say something negative about a company with such power and competitive advantage. If the world works as we think it works, it sounds like a safe business.
However, if we are sure about anything, it is that nobody would sell a safe business. If you were rich and you had the best company in the world, would you share it with the people? Probably not.
About three years ago, Mohamed Bin Salmán the ruler of Saudi Arabia said that he was going to sell about five percent of Aramco. Now, he is selling one to two percent, meaning that there will be at least three percent remaining that one day will reach the market and make prices go down.
Not only that, as profitable as Aramco may be, it is a great source of political power. It is in fact the biggest “weapon” the Saudi Arabian government has to negotiate internationally, and they have used that in the past and will again in the future.
Also, we all know that oil is losing importance with time. Electricity seems to be the energy of the future. Even when the great lobbies will fight against it, it is the natural development of this world that needs greener energy.
We will need to wait and see what happens with this company’s stock. We do not know if we will be losing an opportunity or just saving our money, but we are sure that there will be interesting times to follow.
