On December 11, Saudi Aramco, a Saudi Arabian oil company, set the record as the most valuable publicly-traded company in history. On its first day, Aramco, the world’s largest fossil fuel producer, reached the impressive market value of $1.9 trillion with an initial public offering (IPO) of $25.6 billion.

The decision to take the company public is part of Crown Prince Mohammad bin Salman’s efforts to strengthen his kingdom’s economy during tough political times.

Impressive IPO comes with caveats

As the New York Times has reported, the record-breaking opening for Aramco was below the $2 trillion Salman had targeted for the company’s public opening. Yet, within less than a week of trading, the company’s value had risen to $2.03 trillion. The New York Times also reports that the company had a net income of $68 billion in the first three quarters of 2019.

Even after its public offering, Aramco remains a state-run company, with only 1.5% of the company made available as shares. Some have questioned the high valuation, stating that there appears to be heavy government influence as well as little investor interest outside of the kingdom.

The previous IPO record holder was Alibaba, a Chinese e-commerce company that achieved a $25 billion IPO when it opened to trading in 2014.

Saudi Arabia’s ambition

Crown Prince Salman has big ambitions for his kingdom, stating his “primary goal [for Saudi Arabia] is to be an exemplary and leading nation in all aspects.” The successful valuation of Aramco is said to be a major factor in achieving his ambitions.

However, Salman has faced criticism, both from within his country and from without. A recent attack on an oil production facility has led to questions from his own family members over whether Salman is capable of protecting his kingdom. Also, investigators have found “credible evidence” that ties the crown prince to the assassination of Jamal Khashoggi, a Saudi journalist who had been critical of the prince. Salman has, however, denied any involvement in the journalist’s death.

Origins of Aramco

The origins of Saudi Aramco stretch back to 1933, just one year after the founding of the Kingdom of Saudi Arabia. The king of the new state, Ibn Saud, hoped to find oil and joined together with an American company, Standard Oil Company of California (later to become Chevron). This was at a time when automobiles were becoming increasingly popular and, as a result, the demand for oil was growing.

No one knew for certain that there was oil in Saudi Arabia. In fact, engineers drilled for nearly five years before finally, in March 1938, oil was discovered. Subsequent years would result in more oil discoveries and continued success for the company that would, in 1944, officially become the Arabian–American Oil Company, or Saudi Aramco.

Today, Aramco produces one in every eight barrels of crude oil in the world. It is said to be the planet’s biggest contributor to climate change.

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