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Aramco’s initial public offering remains on track for next year, the company told UAE’s The National in an email, following a report that suggested the initial schedule might be delayed.
The delay, sources told Bloomberg yesterday, would be because of a number of still unresolved issues around the offering, which many believe could be the biggest IPO in history, beating Alibaba’s US$25-billion initial placement by as much as US$75 billion.
“The IPO process is well underway and Saudi Aramco remains focused on ensuring that all IPO related work is completed to the very highest standards on time,” the statement read.
The issues around Aramco’s listing include the valuation of the company and the location of its secondary listing, besides its home bourse in Riyadh. Although Saudi estimates peg Aramco’s worth at as much as US$2 billion, external estimates have questioned the accuracy of this calculation, suggesting it might be significantly overblown.
If the valuation of the company is based solely on its reserves—a staggering 266 billion barrels—the value of each of those barrels is particularly important. At US$7 or US$8 a barrel, the US$2 trillion valuation seems possible. But that’s not all that IPO valuations are based on. Everyone is waiting for Aramco’s release of its financial results in 2018. It would need to report EBITDA of US$130 billion for the US$2-billion valuation scenario to become a reality.
Then there’s the question of the secondary listing. At the moment, the London Stock Exchange is the frontrunner for the deal, after the UK’s financial markets watchdog decided to tweak its listing rules to accommodate the Saudi company.
However, this has led to a backlash from corporate governance groups and members of parliament, who are questioning the motivation behind the FCA’s proposal to add a special category for Aramco in its premium listing rules.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.