Saudi Arabia is pressuring wealthy nationals into taking part in Aramco’s upcoming IPO, The Financial Times reports, citing sources in the know.
The report follows another one, by Bloomberg, which also cited sources saying Riyadh had approached some of the richest families in Saudi Arabia about potentially becoming anchor investors in the listing.
Oddly enough, some of the families approached to be anchor investors - helping to ensure a successful sale in the Aramco IPO - have relatives that were part of the 2017 purge when Saudi Arabia’s leadership locked officials and businessmen in the Ritz-Carlton hotel in Riyadh in what the rulers said was an anti-corruption drive.
According to the FT sources, Riyadh’s approach was not exactly friendly. Words including “strong arm”, “coerce” and “bully” were used to describe the way Saudi Arabia’s government was trying to secure the anchor investors for what many see as the deal of the century in oil and the largest IPO ever.
One of the wealthy Saudis targeted by Riyadh as Anchor investors was Alwaleed bin Talal—a celebrity billionaire who was held at the Ritz-Carlton for three months and who, like the others detained at the hotel, was only freed after he agreed to transfer substantial financial assets to the government. To date, many of his remaining assets in the Kingdom remain frozen but, according to the FT sources, he was offered access to them if only to use them to buy into Aramco. Related: Trump Clashes With California Over Fuel Regulations
It seems Riyadh is nervous about the deal of the century. Crown Prince Mohammed wants the state oil company to be valued at $2 trillion, which would mean $100 billion in proceeds from the IPO, but there are many doubts surrounding this target valuation.
The recent attacks on Saudi oil infrastructure have not helped, either. Despite the world-class assets and the fact that Saudi Aramco pumped just below 10 million bpd before the attacks - or more than the world’s top four listed oil companies combined - financial analysts and investors told Bloomberg earlier this week that the valuation of the company may not fully account for major supply disruptions like the current one.
By Irina Slav for Oilprice.com
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The core of the Saudi Vision is Saudi Aramco IPO which was originally projected to bring some $100 billion to fund investment in the non-oil sector of the Saudi economy.
However, the IPO has of recent times become the Achilles heel of Saudi Vision 2030. The IPO will never see the light of day because of persistent question marks about Saudi proven oil reserves and US Congress-approved legislation relating to 9/11. And without the IPO, Vision 2030 can’t progress further. This explains why Saudi Arabia is reported to be pressuring wealthy nationals into taking part in Aramco’s IPO as a way to secure anchor investors for its largest IPO ever.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London