Buy Aramco Shares: Find out how to do it and if it’s convenient
Published: 6 November 2020 by Valentina
All investors looking for particularly promising, relatively young, and well-established stocks, will consider for sure the importance to buy Aramco shares.
It is a company that in a very short time has attracted the attention of the financial markets, managing to achieve the largest IPO (Initial Public Offering) in history.
Through this guide, we want to analyze the Aramco shares to give you a clear idea about the reasons why the company has achieved such success and, above all, whether buying Aramco shares is worthwhile or not.
A particular emphasis will be placed on a particular platform, which we believe is optimal for this type of investment.
In fact, since it is an asset on which, as we will see, not much information is given, having an investment guide available is essential to proceed.
In addition to explaining if and why to buy Aramco shares is worth, they also provide the ideal solution to get them. You just need to choose platforms like ForexTB (visit the official website here).
These are very complete and simple investment platforms. Just a quick example: They even have the Aramco shares even if we know that it is not possible to trade them on Webank or Widiba.
Saudi Aramco: the largest IPO in history
Saudi Aramco, or Saudi Arabian Oil Company, is one of the most important oil companies in the world: with a production of over 10 million barrels per day, it is also the largest financier of the Saudi government, which owns it.
Although it is consequently a state-owned company, Saudi Aramco has decided to launch its IPO on the Tadawul stock exchange in Riyadh.
The IPO would, according to the plans, allow the company to raise approximately $ 25.6 billion from the sale of 1.5% of the shares. It would have been the largest IPO ever made, even surpassing the record achieved by Alibaba of 25 billion in 2014 at the NYSE, the New York Stock Exchange.
The public offering went according to plan, but the success of the stock did not stop: Some days after the launch, the prices saw Aramco shares rise by 10%, while investors signed requests for more than 3 times the shares offered .
A complete success with a substantial gain for the investors that opted for this asset.
Buy Aramco shares: how to do it?
If you are interested in investing in Aramco shares, you need to know that, at the moment, no many platforms allow you to exchange them. It is an asset that has suddenly set new records, but on the other hand, it is still young.
The company does not have a long history on the stock market and this penalizes it from the point of view of availability for the general public: Forget, for example, that by trading online through a bank, you can invest in Aramco shares or in stock market indices.
Moreover, given that the shares were snapped up in no time, its prices are literally rising. Therefore, it is decidedly more appropriate to opt for derivative instruments rather than investing directly.
In particular, the shares of the Saudi company are suitable for two types of derivatives: Futures and CFDs.
Invest in Aramco futures
Although in the future it may become an interesting opportunity, we currently do not recommend investing in futures on Aramco shares. As we will see later, in fact, the political and economic situation of Saudi Arabia makes the sector fairly unpredictable; therefore, it is better to use other types of tools to “play” on the stock exchange.
If conditions change, you can consider buying Aramco futures, obtaining all the advantages associated with these particular derivative instruments.
Invest in Aramco CFDs
Contrary to futures, CFDs on Aramco shares are less susceptible to the unstable situation of Saudi Arabia. These derivative instruments are extremely flexible and allow you to invest both upwards and downwards in the quotations of Aramco shares.
By choosing the CFDs, the possibility of investing in any trend the shares may reveal in the future is guaranteed. Especially for a young asset like this, this freedom of action is absolutely essential.
If one day the situation worsens in Saudi Arabia, with CFDs it would be possible to intervene on an investment in progress in order to correct it accordingly.
Investing in Aramco CFDs: eToro
To invest in CFD Aramco shares, it is necessary to refer to an online trading platform such as eToro (visit the official website here). In fact, CFDs are derivative instruments that belong to the OTC markets – the so-called Over The Counter markets – or markets that do not comply with the requirements of traditional markets.
The fact that they do not comply completely with these requirements benefits those who, like you, intend to invest starting from a rough knowledge. Regulated markets would impose limitations on you that are impossible to comply if you are just starting.
Among the most respected market makers operating in the OTC markets and that allow you to invest in CFD Aramco shares, we find eToro (click here to register for free).
Israeli broker born in 2015, eToro is regulated by CySEC and FCA and is an ESMA broker, which means that it meets the requirements imposed by the European Union and the UK for the protection of users and their rights. In other words, by investing in eToro you can be sure of operating on an honest and safe platform.
eToro and automatic trading to buy Aramco shares
The reason why we decided to offer you eToro and not any other platform lies in the fact that the broker offers a very special service: eToro is the world leader in Social Trading.
It was not the inventor, but eToro has the credit for perfecting this tool. Social Trading is based on an extremely easy principle: Implementing online trading following the lines of social networks.
In this way, the sharing dynamics between the traders who operate on eToro can be the answers for doubts and shortcomings that can arise at any time. A user has only to share his questions and will get an answer in a very short time.
Moreover, since we are dealing with traders, you can be sure that the information given is reliable for the purpose of effective and profitable operations.
If Social Trading was not enough, eToro also offers another tool: Copy Trading, or the ability to copy the investments made by the major traders operating on the platform.
This solution is optimal especially for young assets like Aramco ones.
eToro is the reference platform for those who want to invest in stocks. For example, you can:
- Trade Juventus shares
- Invest in Facebook stocks
- Buy Amazon shares
Situation of Saudi Aramco: the company
Saudi Aramco is operating in the energy and hydrocarbon extraction sector since almost a century. It is currently among the largest oil producers in the world, not only in terms of mere production, with over 10 million barrels per day, but also regarding the company’s capitalization.
With the launch on the stock exchange, in fact, Saudi Aramco has achieved an overall value of over 1.880 billion dollars.
Although the company had predicted a total capitalization of over 2 billion following the IPO, in fact, it is still a result that, in the short term, placed this company above monsters such as Apple and Microsoft.
The company is headed by Amir H. Nasser, President and CEO of Saudi Aramco and the main political figures of Saudi Arabia are part of the Board of Directors. This reflects the nation’s strong oil-dependent footprint.
The fate of Saudi Arabia is ultimately linked to the fate of the company and especially the influence it exerts on the entire Middle Eastern oil market: This point is fundamental to understand what type of operations is more indicated at the moment.
Situation of Saudi Aramco: Saudi Arabia
Understanding whether or not the numbers that characterize the company hide growth potential, necessarily involves considering the context in which the company operates.
Saudi Arabia is characterized by an economy that gravitates around oil and which, consequently, is strongly exposed to two factors:
- Catastrophic incidents, such as that of the terrorist attack, claimed by the Yemeni rebels, which in September 2019 caused production to halve for a few weeks;
- International policies, such as those desired by OPEC to reduce the daily extraction of crude oil, aimed both at keeping the price per barrel of oil under control and at responding to new energy needs;
In general, this exposure constitutes a double-edged sword:
On one hand, the changes that this type of events impose on the price of oil have benefited the big producers (levitation of crude oil prices).
On the other hand, however, this causes a market saturation (production exceeds demand, albeit controlled) which jeopardizes the stability of the sector in the long term. In the short term, the hot area in which Saudi Arabia is located – between Yemen, Oman and Iran – increases exposure to catastrophic unexpected events.
Saudi Aramco situation: competitors
Saudi Aramco’s main competitors are other American companies: Primarily Exxon Mobil and Royal Dutch Shell. In addition, we find the Russian Rosneft and the Venezuelan PDVSA.
For simplicity, we exclude from considering direct competitors of Saudi Aramco, like the China National Petroleum Corporation or the China National Offshore Oil Corporation, as there is a fundamental difference between the target markets.
As far as direct competitors are concerned, Saudi Aramco is first for annual profits, which are usually around 45/50 billion dollars. If in terms of profits the company is unrivaled in the sector, it is second to PDVSA regarding oil reserves and second to Rosneft regarding daily crude oil production.
The fact is that with its IPO, the company has guaranteed a capital flow that further radicalises this difference. Indeed, the market capitalization achieved by the company is greater than the sum of its competitors.
This financial situation is aimed at a specific goal: the Vision 2030.
Vision 2030: economic reform plan
The Vision 2030 is a socio-economic reform plan wanted by the Saudi Government in 2016 and which develops around 96 goals.
If you want to buy Aramco shares, it is very important to know what the Vision 2030 is all about. Being a socio-economic restructuring plan for the entire country, it relies enormously on the profits coming from Aramco for its implementation.
Did we mention that Aramco is a company wholly owned by the Saudi Government and which counts the most important political figures in the country?
Well, it would be terribly naive not to take Vision 2030 and its goals into consideration, if you want to fully analyze society.
The need to completely restructure the oil-dependent configuration of the Saudi economy and social organization has become a must. Especially since OPEC (Organization of Petroleum Exporting Countries) has imposed a cut in production that is higher than expected.
It is a cut of about 500 thousand barrels per day. An important warning signal for Saudi Arabia and, at the same time, a tempting opportunity to take advantage of the corresponding temporary increase in barrel prices.
The capital raised with the IPO is necessary to speed up the country’s economic restructuring process. In addition, the creation – practically ex-nihilo – of an economic sector that avoids the influence of the petrochemical industry is expected.
Buy Aramco shares: is the IPO a desperate move?
Another important fact for the consideration of the operations on Aramco shares concerns the composition of the shareholding structure carried out so far on the company’s shares.
The main market for Aramco shares is the Riyadh Tadawul Stock Exchange. An extremely provincial market that mostly sees the participation of local investors.
This supports the thesis that the entire listing of the company actually finances the local economy restructuring project. This is a move that leads European and American investors to rightly question the stability of the stock.
On its side, the company has the effective correspondence between capitalization – we repeat: 1.8 trillion dollars – and role in the market. Aramco, more than any other company in the sector, reflects the concept of “too big to fail” and for this reason it is one of the best oil companies to focus on.
At the same time, this stability is precarious. The potential willingness of the company to issue more securities should face the need to significantly reduce the prices. This is because the current shareholder base has exhausted the availability to absorb the offer.
Obviously, a downsizing of the prices would have a serious impact on the current Saudi Aramco investors. Especially considering that SAMA, the Saudi financial authority, has promoted a commercial bank loan program. This was intended to entice current account holders to go into debt to purchase securities.
Buy Aramco shares: Conclusions
In summary, if you are interested in buying Aramco shares, the advice for you is to proceed carefully. The asset is extremely tempting and looks solid although not without risk.
To keep an eye on, are the prices of oil and government bonds of Saudi Arabia. These are, in fact, the two major indices of the changes that the stock could undergo in the future.
If you can keep an eye on these two factors, then trading on Aramco shares could prove extremely fruitful. Otherwise, if it is difficult because you may lack the right knowledge or because it is not the sector in which you intend to invest, we gave you the solution: eToro.
On eToro, you can copy the investments on Aramco shares made by professionals and make profits – or losses – proportional to the capital you invest.
Ultimately, this is an excellent opportunity to make the most of the potential of a young asset that has yet to reveal all its potential.
On the best CFD platforms in order to operate without commissions and with favorable market conditions in terms of low spreads.
The company is listed on the Riyadh stock exchange in Saudi Arabia.
Its headquarters are located in Dharhan, Arabia
The 2018 data speak of over 350 billion USD in annual turnover.