We Still Don’t Know Three Crucial Things About the Aramco IPO

The initial public offering of oil giant Aramco is “on track” for 2018 – was the message that the financiers and corporate chieftains, gathered for Saudi Arabia’s ‘Davos in the Desert’ heard it from the crown prince down to all the Saudi leaders present.

But a more uncertain reality lies beneath the disciplined message put forward in Riyadh. Information such as where it happens, how big it is and who gets to take part is no clearer than it was a week ago and the 2018 deadline looks tight.

In Saudi Arabia and beyond, there’s a lot at stake. Crown Prince Mohammed bin Salman intended to seed a $2 trillion sovereign wealth fund to carry the Middle East’s biggest economy through the end of the oil age and the IPO is the centerpiece of the IPO is the centerpiece of his ambitious reform program. This IPO is also potentially the biggest equity sale in history. And for Aramco’s Wall Street advisers including JPMorgan Chase & Co. and Morgan Stanley, it will also mean a giant pay day.

The official line: the IPO will happen in 2018, both on the Tadawul, Riyadh’s local exchange, and overseasv, was supported by Khalid Al Falih, the country’s energy minister and a close confidant of the prince as recently as this month.

Yet, the first senior official to openly discuss the possibility of forgoing the international part of the IPO — its most important element was Mohammed Al-Jadaan, the country’s finance minister, on Thursday.

“We have said publicly that Tadawul is for certain,” Al-Jadaan told the Financial Times. “Are we going to go with an international market? If we go, where are we going? And if we go, are we going public or we are going private?”

The decision to go ahead with the IPO, which is in the hands of the royal court and preparatory work, which they said will be completed on time for 2018, have been started to be distinguished by Aramco executives.

“Things are on track for 2018,” Aramco Chief Executive Officer Amin Nasser told Bloomberg at the conference. But when asked specifically if that included both the domestic and international IPO, he hedged his response. “That decision will be decided by the shareholder, not by the company. The shareholder will make the decision regarding the venues.”

“Going through the IPO process is complicated,” Euronext CEO Stephane Boujnah said in an interview in Riyadh. “It’s a big move even for a small company, so you can imagine when a very big company, which is so significant for the wealth of the country, is going through that process, it’s normal that some compromises take time to be defined.”

And yet, few would dare to bet against the IPO because it is so important for Prince Mohammed, who’s become the kingdom’s dominant political force.

Dwarfing the $25 billion that Chinese group Alibaba raised in the biggest IPO to date, giving the 5% the country has said it could sell at a market valuation of $100 billion, Prince Mohammed, often known by the acronym MBS, has said Aramco could be worth at least at $2 trillion. And many believe that Aramco will be sold in 2018, whatever it takes with the crown prince firmly behind it.

“Clearly, there are many serious problems with Saudi Aramco’s privatization,” said Paul Stevens, an oil expert at Chatham House think tank in London. “The problem: it is the flagship for Vision 2030 and MBS’s reputation.”

(Adapted from Bloomberg)

Categories: Economy & Finance, Uncategorized

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