During our December reading, we came across an article from “the Hustle” highlighting Saudi Aramco’s successful IPO. Saudi Aramco’s first listing date was on December the 11th and the piece highlighted how “Saudi Aramco hit a $2T market cap just 2 days after its historic IPO”. After this, we also came across a Forbes article raising and answering many of the questions we had around the listing and its ESG aspects.
Forbes article: Saudi Aramco IPO Hits $2 Trillion Mark Amid Guarded Forecast
The MSCI has four Saudi Arabian Indices all dominated by the financial sector. With a float adjusted market cap just below $10bn, Saudi Aramco was included in all four indices as the largest energy company. Its average index weight is 5.3% and the average weight for the energy sector is only 6.2%. Based on the MSCI’s country classification, Saudi Arabia is an emerging market. Therefore, we anticipate that Saudi Aramco may also be included within the MSCI All Countries World Index (ACWI) which covers both developed and emerging market countries. For context, Visa is the 10th largest constituent within the ACWI and has a float adjusted market cap of $325bn.
According to the above Forbes article, the company was also scheduled for inclusion within the FTSE Global Equity Index which covers over 16,000 companies across 49 developed and emerging markets. The inclusion within that index would be in-line with Saudi Aramco’s expectations. In an article from FTSE Russell where the index provider motivated its reclassification of Saudi Arabia as a secondary emerging country (article here), the IPO was referred to and how its success would benefit the country.
Bearing in mind that Saudi Aramco may be included within both indexes, there are possible investment cases to be made by global equity managers around the globe. All our global equity managers have not yet taken position within the company, with some possibly considering it if it meets all their investment criteria.