Saudi Aramco, the world's largest oil company, took another step along its path to a stock market listing on Saturday, saying it would announce a final price for its shares when December 5, whose trade is expected to begin in mid-December.
The 658-page prospectus of the company was released a week after Aramco formally announced plans to sell the shares in the local Saudi stock exchange known as Tadawul.
Aramco's initial public offering, perhaps the world's most profitable company, could boost its biggest, surpassing the nearly $ 22 billion raised by Alibaba, China's e-commerce giant, in 2014 But it could still fall short of expectations raised by Crown Prince Mohammed bin Salman when he first announced his plans for the offering more than three years ago.
The document does not specify the total percentage of the company for sale. While it said that up to 0.5 per cent of the company's shares will be set for individual investors, the percentage for institutional investors, which may include oil companies from China and other countries, will be determined by whether the prince and his counselors could strike a deal with them.
Prince has previously said the company is valued at about $ 2 trillion. Some analysts are now skeptical of that estimate. Bernstein, a Wall Street research firm, on Monday closed the company's value at $ 1.2 trillion to $ 1.5 trillion. The prince also said the stock would trade in a prestigious international exchange such as New York or London, but that list was postponed, with some analysts asking if it would happen.
There are also deeper concerns about the extent to which new investors' interests in the company can be protected. With only a small percentage of the company's shares likely to be publicly traded, the Saudi government remains far from the most shareholder and, analysts said, could do so because it wants an organization that generates almost all government revenue.
Geoffrey Heal, a professor of energy economics at Columbia Business School, said potential investors should weigh the trade-offs between Aramco's massive, oil resources and questions about whether how can the company be managed in the future. 19659002] "There is a lot of oil there, and the quality of the oil is high," he said, "but everything else is pretty negative about it."
Mr. Heal said Aramco faced a number of risks, including geopolitical risks in the Middle East, highlighted by aerial attacks in September at two major Aramco manufacturing facilities, and the potential decline in demand of oil due to concerns about climate change.
In fact, the prospectus acknowledged that "terrorism and armed conflict can be materially and adversely affected" Aramco and its share price in the future.
The prospectus detailed a series of recent attacks, including those in September, and concluded that others could have a serious impact on "business, financial position and results of operations" as well as well as the discouragement of investors in buying shares.
The company also recognized that oil demand growth has been slower than global economic growth in recent years due to factors such as fuel efficiency gains and the emergence of alternative energy sources such as wind and solar and electric vehicles.
Growth demand for oil is likely to level by 2035, according to the document, but it added that the market share of cheap manufacturers such as Saudi Arabia is likely to rise. The kingdom, the document estimates, could produce an increase in oil prices by 2050.
For investors, Mr. Heal said, the most immediate threat could be rising oil supplies. A advance in oil supplies from the United States as well as other producers such as Brazil, Canada, Norway and Guyana could drive prices down. In that case, the company may struggle to earn enough to pay off the huge dividends of $ 75 billion a year it promises to investors.
"Earnings may be lower than we think," Mr. Heal said.
Aramco stated in the prospectus that the company was "committed to delivering sustainable and growing dividends to shareholders" by raising oil prices. The company further stated that the government was prepared to withdraw a portion of its dividends so that nongovernment shareholders receive a payout based on $ 75 billion in total.
However, Aramco felt the effects of lower oil prices this year. Already, revenues for the first nine months of 2019 are running 18 per cent lower than the same period a year ago. Lower output and the disruption caused by the September attacks may also play a role.
Stuart Joyner, an analyst at Redburn, a market research firm, said that in some respects Aramco was not operated like BP or Royal Dutch Shell, which, he said, produced any oil they could earn as much money as possible for shareholders.
Instead, in recent years, the Saudi government has returned the production of Aramco as part of a joint effort with OPEC and other producers, including Russia, to curb prices.
But now that there will be outside investors, "that creates a conflict of interest and a management uncertainty in the middle of this company," Mr. Joyner said.