When a company goes public, one of the upsides for the general public is it has to show its transaction more transparent. As a state company it follows the directions of its political masters, otherwise the leadership will be replaced. In the case of Saudi Aramco it is the world’s most profitable company because it owns all the oil and gas in Saudi Arabia. Much of the oil being drilled from a relative standpoint is inexpensive oil to drill which means oil that is sold on the world markets has a very high profit margin. The country of Saudi Arabia knows at some point in the world’s history there will be a transformation from oil to an energy source. Some of that energy sources is solar and wind, but the time line is still decades away. in the meantime, the country is trying to diversify its economy by being slightly less dependent on oil and gas. In an article by Marwa Rashad and Rania El Gamal of Reuters, Saudi Aramco bought 70% of Saudi Basic Industries (SABIC) which a giant petro chemical industry. In the oil industry – there is money in the discovery of oil and the refining of that oil into the millions of products that our society uses. When oil prices are down, the refinery is more valuable.
When Saudi Aramco sold shares to the public, it had to report its dealings. Saudi Basic Industries was own by the Public Investment Fund (PIF) and sold its 2.1 billion shares to allow PIF $93.9 billion to spend on diversifying the economy. Prior to going public all the companies were essentially agencies of the government and before it was internal shifts. Now that Saudi Aramco is public, all must be seen going through the stock exchange (Tadawul) at market values.
Linking to dividend paying stocks, one of the reasons investors liked the companies is the ability to see what transactions take place and can question why or congratulate the company for doing its business. If you like the direction of the company and management seem to be transparent, then you can feel better about holding the company for a short or long term. The longer you hold a dividend paying company the less it costs you to hold the company and the wealthier you are in the long run.
There are more questions than answers, till the next time – to raising questions.