The long-wait is over. Today, reports surfaced that Saudi Arabia has long-ago called off its highly anticipated, $100-billion-dollar IPO, Reuters sources confirmed, with even plans to list the state-run oil company on its domestic bourse, Tadawul, being scrapped. Its merry band of advisors have also been dissolved.
The listing, which was to be the largest IPO in history, was delayed numerous times, its peril-fraught journey likely doomed from the start, encountering barriers anywhere from finding a suitable listing venue to quantifying its sizable oil reserves, from suspect transparency to in-fighting between the Saudi government and Aramco.
Despite the numerous roadblocks, the powers that be in Saudi Arabia and in Saudi Aramco have repeatedly and steadfastly insisted that the IPO was still on track, if not delayed. Suspicions that the IPO may never see the light of day first surfaced almost a year ago, as sources close to the deal suggested that the plans to list in the second half of 2018 was overly ambitious, with several issues to be settled before the listing could take place. Aramco denied this, insisting that the IPO was still on track.
Then in October 2017, an even more disappointing blow to the massive IPO's plans came, with sources saying that the IPO might be listed privately instead of publicly. Still, Aramco insisted that the plans, wherever it decided to list, were still on track.
Now, sources close to the matter have said that the plans for listing the IPO were scrapped quite some time ago, but the company line started out with mild disappointment, initially suggesting there may be a delay, and gradually increased to a full-scale cancellation.
The plans to list a piece of Aramco made waves in the market when it was first announced due to its sheer size. Sources close to Aramco in April said Aramco's cash from operations, or adjusted cash flow, for H1 2017 was a staggering $52.1 billion, with a $13 billion dividend and $14.7 billion capex. Net debt was just $1.3 billion.
By Julianne Geiger for Oilprice.com
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Comments
The IPO or any Saudi investments or funds in the United States could have been at risk by the legislation passed by the US Senate and the US House of Representatives in May 2016 that would allow families of September 11 victims to sue the Saudi government for damages. The law removes the sovereign immunity, preventing lawsuits against countries whose citizens were found to be involved in the attacks. The minute one law case is launched by an American citizen against the Saudi government, all Saudi assets in the US will be frozen.
Another reason is that no investor would have considered buying into the IPO without independent auditing of Saudi proven oil reserves. Saudi Arabia claims proven reserves of 266 billion barrels (bb) when my own research and others’ has shown them to be in the range of 74-80 bb.
A third reason is that rising oil prices have obviated the need for Saudi Arabia to sell 5% of Saudi Aramco.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London