The Saudi govt will not be offering any its oil for sale. They are offering access to the potential profits of a corporation…Aramco. Owning 5% of the Aramco stock does not grant any of those new shareholders ownership of 1 bbl of Saudi Arabian oil.
no different than in most countries in the world where the State owns all the hydrocarbons and operators lift oil to get either a share of the profits or net out production from royalty. And it definitely isn't any difference than buying share in any oil and gas company, all you have is a share, you don't actually get any of the profit (except where dividends are present) but count on share price rising through continued successful efforts.
In fact, being a very small minority owner doesn’t allow them to have any impact on the operations of the Aramco company.
But being a shareholder in any company, even when it is owned predominantly by individual shareholders yields little ability to impact operations. It is only done when there is greater than 10% held by one party who can then call a special shareholders meeting to try and force management to do something different. IN reality this isn't much different than a normal corporation share offering it just means the float is relatively small.
Aramco is a CORPORATION that has a production sharing agreement with the Saudi govt which, to the best of my knowledge, has never been made public.
I believe it is a tax/royalty agreement and not a PSA. Aramco is private and the point of the IPO is to make them public.
Question: how much profit did the Aramco CORPORATION make in 2017? I
Really has no bearing on the IPO company as the tax/royalty structure will be different. The valuation that everyone is tossing out there takes this into account, which is why they believe a $100MM sale of that amount of shares is a reasonable expectation.
The Saudi govt has promised to reduce the tax rate to 50% when the IPO is placed. But there is no law preventing it from increasing it back to 85% (or 99%) 6 months after the IPO. It has the freedom to change its CORPORATE tax rate as was just done in the USA.
And changes in tax/royalty structures happen all over the world. Interestingly enough when I explain to people that such changes have happened more frequently and with less warning in the US and Canada than they have in places like Colombia or Algeria they refuse to believe it.
I wouldn't touch it with a barge pole - I'll stick with my Shell Shares !!
Without knowing what Aramco will eventually do in the future regarding further dilution, issuing dividends etc such statements set you up for future ridicule I'm afraid. The general public will see nada of the IPO share, it will be divided up amongst the investment banks. When it breaks on the market the price will invariably rise for a couple of days and then fall back to the IPO level or slightly below within a few weeks. The future share price will be dependent more on what Aramco reports (which they will have to legally and all reserves and financials will have to be audited) than anything else. Personally, I am going to wait a few weeks for the initial exhuberance to settle down and once all the day traders are out of the mix I will pick up some amount. It isn't going to devalue anytime soon and the share price will be based on some considerable due diligence by the banks.