Saudi Aramco’s IPO challenges explained I FT


This month Riyadh will
make a final decision on whether to sign off on the
long-awaited initial public offering of its state
energy giant Saudi Aramco. The company is the kingdom’s
biggest revenue earner. And Crown Prince Mohammad bin
Salman, the heir apparent, has sought to accelerate
plans for the listing in recent months. The flotation is at the
heart of ambitious plans to revamp Saudi Arabia’s
economy with tens of billions of dollars urgently needed
to fund mega-projects and develop new industries. But will Saudi Aramco
get the $2tn valuation that the young, rather impatient
Prince Mohammad is after? Some industry analysts believe
the company’s worth closer to $1.5tn. But potential investors
from wealthy families in the kingdom to sovereign
institutions in the Middle East and elsewhere, will be
weighing up a series of factors ahead of any listing, which
Saudi officials want to happen as early as this year. First is energy security. September saw a
series of attacks on Saudi energy infrastructure,
which halved the kingdom’s oil production. Even as officials now say
the company has bounced back like a phoenix from
the ashes, the incident laid bare the vulnerability of
the world’s biggest exporter, called into question
the kingdom’s reputation as a reliable producer
and the country’s ability to protect its prized assets. I would say that Saudi Arabia
is a consumer-oriented country. And we have, even
during under duress and under this
stressful environment, we have demonstrated
our resilience as a government, our
restraint as a government, I must say also. Second is government
interference. Prince Mohammad has
given more influence to the kingdom’s
public investment fund over the IPO process. This is his chosen vehicle
for enacting his reforms. And its head is now the
chairman of Saudi Aramco. He has also appointed his older
half brother, Prince Abdulaziz, as energy minister, replacing
industry veteran Khalid al-Falih who is privately
against the IPO. The series of moves
has raised the prospect of creeping state influence in
the company’s corporate affairs and driven fears that Prince
Mohammad is determined to dictate the
terms of the listing rather than leave
it to market forces. Riyadh is pressuring
wealthy Saudi families to buy stakes in Saudi Aramco. And it has pushed the
company to cut back on its international expansion
and future capital spending plans. Traditionally, this was the
domain of corporate executives not government officials. And third is fiscal terms. Riyadh is pulling
out all the stops to get this listing
of up to 3 per cent of the company over the line. Saudi Arabia is planning to
change state royalty payments and cut corporation tax,
alongside announcing an annual dividend of $75bn
to woo potential investors. In an unprecedented
move, Riyadh said minority investors will be
prioritised in any shareholder handouts that will still
largely go to the Saudi state. Yet as of right now
the dividend yield is below that of some other
international energy majors, such as Royal Dutch
Shell or ExxonMobil. So why would an
investor want to buy in? Some might say it is
because Saudi Aramco is one of the best-run
oil and gas companies out there, that manages the
energy assets for the world’s largest exporter nation. Others will argue that all the
banks which have aggressively lobbied their way
into roles for the IPO have endless rosters
of wealthy clients and so that they will
make this happen. But will that alone be enough? Ultimately, the
company is an arm of the Saudi state,
which is becoming more vulnerable to the whims of
the country’s de facto ruler.

8 thoughts on “Saudi Aramco’s IPO challenges explained I FT

  1. Say what you like to say, the truth always prevails. The same attack happened before the Saudi Aramco bond, and the bond attracts 100bn dollars. Also, the same attack happened before Saudi Aramco revealed its revenue, and oil reserves, and number make you shut up. The same method of attacking Saudi Arabia and spreading fack news happened after the attack on the refineries. Some of the analysts in FT said Saudi Aramco will need a year or more to recover from this attack. After three weeks Saudi Aramco goes back to the same amount of barrels before the attack makes FT speechless. You can attack Saudi Arabia day and night, you can attack the crown prince day and night, we have a vision and nothing will ever stop us until we will reach our ambitions, we are determined to achieve our goals. Final words, I wish from Financial Times to apologize for all the fake news that your journalists orchestrate against Saudi Arabia to serve the liberal agenda until it can get our respect back, we are Saudis.

  2. The main problems are a lack of accounting transparency and potential interference from the state. Security of facilities can and need to be be greatly improved.

  3. Saudi arabia is not going to sell Aramco anytime soon, the IPO of aramco is basically Smoke and Mirrors
    1-Why the house of saud would sell such a profitable and relevant company? Selling aramco even a little bit is basically buy now pay later.
    2-Why would anyone buy a oil company that is target of terrorist attacks and that is what has been a war zone for more than 6000 years?

  4. As soon as Dems get to power they will normalize relations with Iran and Venezuela and these 2 countries will flood the international market with their cheap oil = Game Over Saudi Arabia.

  5. It is the most blood stained business as well, blood of Yemenis children, business that is responsible for millions of starvation inYemen, responsible for 9/11 attack in US, 16 of 19 terrorists were Saudis national, who some of them had Royal connections. Up to now their life long depend upon oil revenue, don't let their reach gets beyond their beloved life long, every body who has a slightest care for humanity will not go after this business.

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