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Saudi Arabia’s energy giant Aramco may resort to only a local listing, unnamed sources close to developments around the company told Reuters. The information comes on the heels of an FT report that quoted British government officials as saying their Saudi counterparts had warned them the Aramco IPO may be delayed until next year.
The Reuters source went on to say the preparatory work for the listing was proving to be a disappointment, adding that Saudi Arabia was currently negotiating with MSCI to be classified as an emerging market, which would allow it to tap Western investors along with ones from China, Japan, and South Korea.
“I would guess it is about evens that there will be no international IPO,” the Reuters source said, reinforcing doubts that have surrounded the IPO of the century for months despite assurances from Riyadh that all is going smoothly.
Last week, public attention was focused on whether Aramco would pick New York or London for the international listing, as Crown Prince Mohammed embarked on a trip to both capitals to negotiate the move, but now attention has quickly switched to whether there will be an international listing at all as the problems around the company’s preparations come up to the surface.
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Earlier, there was even talk that Aramco may resort to a private placement, but last week Energy Minister Khalid al-Falih was adamant that there will be a listing on the Saudi exchange, Tadawul. Speaking to CNN, he said, “The only thing we know today is that Tadawul will be the key listing location as our national exchange.”
New York, which was reportedly Prince Mohammed’s preferred location for Aramco’s international listing, has lost ground to London on concerns about litigation, not just because of 9/11 legislation allowing U.S. citizens to sue Saudi citizens, but also because of the wave of lawsuits against Big Oil companies, which is apparently making the Saudis nervous.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
My opinion is based on the following factors: first, listing Saudi Aramco on the Saudi stock market, Tadawul, will overwhelm Tadawul creating liquidity concerns; second, Saudi Arabia is no longer financially in need of the IPO; third Saudi valuation of the IPO is far bigger than Wall Street’s and other financial companies’ valuations; and fourth, there are many economic and geopolitical issues involved with the IPO not least among them risk of litigation by the United States.
The Aramco IPO was proposed as part of Saudi Arabia’s Vision 2030 with the objective of securing an estimated $100 bn from the sale of 5% of Saudi Aramco in support of Saudi diversification of the economy.
The recent rise in oil prices is already starting to repair the damage inflicted on the Saudi economy by the oil price crash in 2014. So financially, Saudi Arabia has no need for the IPO.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London