What’s been dubbed the biggest IPO in history, Saudi Aramco’s 5-percent listing, could take place later than initially planned, sources familiar with the deal told Bloomberg. The sources did not go into detail as to what could delay the listing but, as Bloomberg notes, there are still several issues to be settled ahead of the listing, which was originally scheduled for the second half of 2018.
To begin with, Aramco has yet to announce the location of its secondary listing, which would be abroad. 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 had led to a backlash from corporate governance groups and members of parliament, questioning the motivation behind the FCA’s proposal to add a special category for Aramco in its premium listing rules. These require the listing of at least 25 percent, which is far from what Aramco plans to list. The decision on the secondary listing will likely come in October.
The company’s valuation is also turning into a problem. Riyadh has valued its state oil company at between US$1 and US$2 trillion, but external estimates peg the company’s worth much lower. The valuation of Aramco is directly tied to oil prices, so any new rout could deal a severe blow to Riyadh’s hopes for a windfall from the IPO – a windfall it needs to plug its budget hole and fund the ambitious Vision 2030 diversification program.
If the US$2-trillion valuation becomes a reality, the IPO could bring in US$100 billion, which would make Aramco’s IPO the biggest in history, beating Chinese Alibaba’s US$25-billion IPO. The chances of this happening, however, are slim, given the oil price environment and Aramco’s reputation as one of the opaquest companies in the industry. Investors are bound to be wary of this opacity, even though Riyadh is putting a lot of effort into making Aramco more transparent.
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.