On-off Saudi Aramco IPO ‘back on’

Saudi Aramco’s on-off-on-again initial public offering is being accelerated, according to the Wall Street Journal, though it remains unclear when the listing may happen.

Saudi Crown Prince Mohammed bin Salman has said he wanted to sell five percent of shares in the company, which he valued at $2 trillion. Such a selloff, at $100bn, would still be the world’s largest-ever initial public offering (IPO).

But the IPO has been delayed numerous times, as oil prices fell and industry experts and analysts suggested Aramco would be unlikely to reach the $2 trillion target valuation.

“If, let’s say, oil prices are trading at $60 a barrel, there is no way we can get the $2 trillion valuation the crown prince wants,” one senior Saudi official told the WSJ. “We cannot even get to the $1.5 trillion valuation.”

The public offering has also been delayed due to the oil giant buying a $69bn stake in SABIC, a state-owned chemical producer, in a decision reportedly made by the crown prince himself. That would swell the coffers of the state sovereign wealth fund, and allow bin Salman, the de facto ruler of the kingdom, to embark on a reform spending spree.

Such a cozy relationship between the world’s largest oil company and the royal family is hardly new. 

“In the 1950s, Aramco wired the palace of the local governor, transported a gift elephant across the desert, and painted its planes with the Saudi flag before flying the king around Arabia,” analyst Ellen R Wald wrote in Bloomberg.

“In recent years, Aramco provided cheap fuel for every aspect of the Saudi economy and society. Aramco even built the country’s premier soccer stadium.”

Recent revelations around the once-secretive company have got investors salivating, not least the announcement that Aramco made a net profit of $111bn in 2018 – more than twice the net profit of Apple.

But in a call expected on Monday, investors will likely want to be assured of the board’s independence from the royal family’s interference. It is certainly a company like no other, and some small form of largesse towards the kingdom’s rulers is unlikely to dampen enthusiasm from those looking to broker the deal.