2. The largest oil company in the world is
going public with an IPO valued at
about $2 Trillion. Saudi Aramco is the
state-owned Saudi Arabian oil company
that out-produces any other single oil
company and appears to have lots of
reserves still under the desert and the
Persian Gulf.
3. We wrote recently how it might be a
good idea this next year to invest
outside of the USA. Is Saudi Aramco a
good investment offshore or a better
pick than other oil companies? For that
matter, how do you invest in the Saudi
oil company?
5. Oil was first discovered on the Saudi
Arabian Peninsula in Bahrain in 1932
and in Saudi Arabia in 1938. A
succession of US oil companies
explored and found oil, sold parts of
their interests and found oil in Dubai as
well.
6. In 1949, the Saudi king threatened to
nationalize oil facilities and gained a
50-50 share of profits. The company
continued to find more oil and grow
over the years.
7. In 1973 the USA supported Israel in the
Yom Kippur War and Saudi Arabian
government retaliated by “acquiring” a
25% “participation interest” in Aramco
followed by 60% in 1974 and all of the
rest in 1976.
8. Aramco managed operations until the
late 1980s at which time the entire
operation became the Saudi Arabian
Oil Company. This is the real name of
the company today despite the IPO
being referred to as Saudi Aramco.
9. This company became the world’s
largest in 2005 when its estimated
market value approached $800 billion.
This month as the shares have risen in
value to about $2 Trillion, the company
is again the largest in the world,
surpassing Apple.
11. Saudi Aramco trades on the Saudi
Arabian stock exchange, the Tadawul.
Unfortunately, to invest directly in Saudi
Aramco, you need to buy it on the
Tadawul exchange.
12. And, according to U.S. News, individual
foreign (non-Saudi) investors will not
find Saudi Aramco available outside of
that exchange.
13. Aramco decided in November that it
would not list its IPO shares on a major
U.S. exchange, making it difficult for
the average U.S. investor to gain
access to the stock.
14. Tadawul has strict rules about foreign
investment. Qualified institutional foreign
investors must have at least $5 billion in
assets and at least five years of investing
experience to be eligible to trade on the
Saudi exchange. Prior to 2015, foreign
investors were prohibited from trading on
the Tadawul exchange entirely.
15. For the time being, the only alternative
for the normal investor is to buy shares
of an ETF that tracks a basket of Saudi
stocks (which will soon include Saudi
Aramco).
16. One example is the iShares MSCI
Saudi Arabia ETF but there are others
as well. This approach dilutes your
exposure to Saudi Aramco but, for now,
is the best alternative for most
investors.
18. The Saudi Arabian Oil Company makes
lots of money as the country sits on a
vast pool of oil and natural gas.
However, there is a long history dating
back to 1949 of the Saudi government
(king) finding reasons to increase the
government’s share until foreigners are
excluded.
19. Market Watch looks at investing in
Saudi Aramco and mentions the ETF
approach. They also note the risk of
investing in Saudi Arabia by quoting
from the IPO prospectus.
20. The interests of the Government, the
Company’s controlling shareholder,
may differ from the interests of the
Company or the Company’s minority
shareholders.
21. The Government will continue to own a
controlling interest in the Company
after the Offering and will be able to
control matters requiring shareholder
approval.
22. The Government will have veto power
with respect to any shareholder action
or approval requiring a majority vote,
except where it is required by relevant
rules for the government.
23. And, because Saudi Arabia is a
monarchy, the rules for the government
can be changed at any moment by the
king.
24. This having been said, Saudi Aramco
makes a lot of money and buying
shares of an ETF that tracks the
company as part of a basket of Saudi
stocks is a reasonable way to diversify
your portfolio.
25. Just don’t put everything that you have
into this investment and wake up some
morning to find out that the Saudi Royal
Family needed more money and
“acquired” your investment!
26. For more insights and useful
information about investments and
investing, visit
www.ProfitableInvestingTips.com.
