In a distinguished article by Mr. Omar Al-Manea titled “Aramco Buying Back Its Shares Instead of Going Public,” he assumed that securing liquidity was the fundamental reason behind Aramco’s planned offering. On that basis, he favored an option under which sukuk would be issued, and their proceeds used to repurchase part or all of the stake that might otherwise be offered to the public. I believe the reasoning behind my brother Al-Manea’s view lies in the lower return an investor expects from sukuk compared with shares. Accordingly, the cost of raising $100 billion through debt, or through a combination of debt and a public offering, would be lower than raising it entirely through an IPO.

Without disputing the view regarding the fundamental reason for the offering, and without addressing the size of the debt — which would increase the burden of sovereign guarantees and contingent liabilities on the government — the assumption that 5% of the company is fixed at a value of $100 billion, without room for fluctuation, is itself sufficient reason to reconsider the debt option. There is no doubt that using debt as an alternative to increasing capital or liquidating part of it is a familiar strategy in the decisions of listed companies, if, and only if, their market values are relatively stable.

The official statement made by His Royal Highness Crown Prince Mohammed bin Salman in his interview with media presenter Dawood Al-Sharyan was as follows: “The size of the stake to be sold depends on: first, demand; second, investment opportunities inside or outside Saudi Arabia... so the stake will not be far from 5%.” This statement, accompanied by full confidence that the Public Investment Fund has a clear vision regarding investment opportunities over the coming ten years, is clear evidence that the present objective is simply to raise $100 billion. Achieving that objective may require giving up less than 5%, more than 5%, or exactly 5% of Aramco. Demand will determine that, and demand is decisively linked to the relative stability of market value, in addition to improvement in the company’s performance.

Several factors influence the relative stability of market value, foremost among them attractiveness. The attractiveness of investing in sukuk is lower than that of investing in an IPO, because of the difference in annual returns. If the objective — $100 billion — may cost Aramco close to 5% through a public offering, what is the likelihood that it would cost the same percentage through the alternative option of sukuk? There is no doubt that investment attractiveness would decline in the second case, and that decline would coincide with a higher cost in terms of the ownership percentage relinquished in order to achieve the $100 billion objective.

There is also no doubt that debt would be more efficient if the benefit from the lower returns borne by Aramco exceeded the value of the difference in the ownership percentage surrendered under the two alternatives. But, of course, and with complete certainty, it does not.

How does IPO alternatives and the cost of capital affect the Gulf?

Its effect appears in how costs, incentives, and resources are managed, and in the Gulf's ability to turn decisions into sustainable value. The direct context is to the sukuk alternative for Aramco’s IPO, arguing that lower investor appeal may raise the ownership cost of raising $100 billion.

What does the factor of institutions reveal about investment disclosure?

Disclosure builds trust because it reduces uncertainty and makes risk pricing closer to analysis than guesswork. Through the angle of institutions, the result appears not only in declared language, but in the policy’s ability to change incentives and outcomes.

What does the factor of institutions reveal about valuation figures?

A valuation figure compresses many assumptions and is not enough alone; sound judgment reads risk, debt, disclosure, and growth first. Through the angle of institutions, the result appears not only in declared language, but in the policy’s ability to change incentives and outcomes.

What does the factor of institutions reveal about company valuation?

Company valuation requires reading assets and profits alongside governance, risk, and the ability to generate future cash flows. Through the angle of institutions, the result appears not only in declared language, but in the policy’s ability to change incentives and outcomes.