Question

1. Why has the government of Saudi Arabia decided to sell shares of Saudi Aramco? What benefits does the decision offer the country?
2. What are the benefits of listing Saudi Aramco on a larger exchange like the NYSE rather than the local exchange?

Answer 1

Saudi Arabia decided to sell shares, because the value of the shares of the Saudi Aramco was fluctuating due to the falling price of crude oil in the international market. It made the country to sell off its ownership in the company and preserve its wealth. So, the first benefit is the funds raised by selling the shares that will be reinvested in other projects. It will help raise values for the country. The second benefit is the incoming of the private ownership that can run the company more efficiently with experienced management team and mange it to deliver higher level of profits. The third benefit is the  make the company reorganize the strategic initiatives to work in changing global environment. It will make the company become sustainable in the long term. Besides, the country also get higher return on investment done when the company was established. So, there are different benefits to the country.

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Listing the company on a large stock exchange has many benefits. The first benefit is the presence of huge number of investors of different and bigger profiles that can bring funds to the company. The second benefit is the presence of liquidity in the bigger stock market. It will make trading of the company shares to be more frequently and it will bring more trust and belief in the company's share in the large stock exchange. The third benefit is the different types of financial instruments that can be utilized by the company to raise funds. These benefits are not available at the local stock exchange. So, it is beneficial to the company to list on a bigger stock exchange.