Gauging market sentiment before the 2018 Saudi Aramco IPO led Oil Minister Khalid al-Falih to personally meet with top hedge fund managers, according to a new report by Bloomberg.
Riyadh has long considered hedge funds to be unhelpful speculators, so the sudden interest in their opinions seems abrupt. Anonymous sources who spoke to Bloomberg on the nature of the meetings said the top OPEC exporter had been reconsidering the importance of the role hedge funds play in the oil markets.
The meetings occurred days before al-Falih’s trip to St. Petersburg for Russia’s flagship economic conference. Though officials from the oil ministry have met with hedge funds in the past, the Minister himself had not been involved in such meetings to date.
Amongst the hedge funds who got private time with the al-Falih: BBl Commodities LM, Glencore, and Andurand.
The Minister is a frequent traveler. As part of his travel schedule, he holds multiple meetings during his trips. We do not disclose the participants of these private meetings nor their content, if and when they happen,” the Saudi Energy Ministry said in a statement.
Hedge funds could play a major role in the coming Saudi Aramco initial public offering. International fund managers and institutional investors largely expect Saudi Aramco to be valued at up to $1.5 trillion, according to a survey by investment bank EFG Hermes, with most experts disagreeing with Saudi officials who have said that Saudi Arabia’s oil giant is worth around $2 trillion. The skepticism regarding Aramco’s claimed value could bring stock prices down when shares go public.
However, most of the attempts at estimates by institutional investors, fund managers and industry professionals are largely based on assumptions and speculation regarding how much oil reserves Saudi Arabia really has, which Aramco businesses would be included in the listed entity, how much income taxes and revenue royalties the company would pay to Saudi Arabia, and where oil prices would go a year from now.
By Zainab Calcuttawala for Oilprice.com
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