The long-planned initial public offering of a sliver of Saudi Arabia’s state-run oil giant Saudi Aramco will see shares traded on Riyadh’s stock exchange in December, a Saudi-owned satellite news channel reported Tuesday as the kingdom’s marquee investment forum got underway.
The report by Dubai-based Al-Arabiya offered a crackle of life to the Future Investment Initiative in the kingdom’s capital of Riyadh, an event created by Saudi Crown Prince Mohammed bin Salman. Initial panels at the forum offered a pessimistic look at a world as participants described the global economy as a teetering on a 1930s-level crisis.
Prince Mohammed, however, hopes for a very-optimistic $2 trillion valuation for Aramco, which produces 10 million barrels of crude oil a day and provides some 10 per cent of global demand. That would raise $100 billion he needs for his ambitious redevelopment plans for Saudi Arabia.
However, economic worries, the trade war between China and the U.S. and increased crude oil production by the U.S. has depressed energy prices. A Sept. 14 attack on the heart of Aramco already spooked some investors, with one ratings company already downgrading the oil giant. Meanwhile, questions persist over how the initial public offering will be handled even as Saudi Aramco offers sweeteners and promises of an estimated $75 billion dividend next year.
The report by Al-Arabiya did not elaborate and cited anonymous sources for the information. However, the channel often breaks news before even the kingdom’s state-run media and is widely believed to have a direct line to the Al Saud royal family.
The station’s English arm offered more details, saying that a final price for the stock will be set Dec. 4, with shares then beginning to be traded on the Riyadh-based Tadawul stock market on Dec. 11. It added that the Saudi Capital Markets Authority will make a formal announcement about the IPO plans on Sunday. Pricing will begin Nov. 17, it said.
“The Aramco IPO is a cornerstone of Saudi Arabia’s Vision 2030 plan, which aims to wean the kingdom off its reliance on oil to diversify the economy,” the channel said in its report.
Saudi state media and government officials did not immediately acknowledge the report. Saudi Aramco said it “does not comment on rumour or speculation,” but did not dispute the report. There also have been other delays in the IPO as well, which has analysts still skeptical.
There also have been decisions seemingly forced onto Aramco recently, including the nearly $70 billion purchase in March of the petrochemical firm Saudi Basic Industries Corp. just before it announced a plunge in its quarterly profits. That has seen a change in the long-standing perception that a “strong Saudi Aramco is a strong Saudi Arabia” to viewing the company as a “great source of capital,” said Ellen R. Wald, an Aramco expert who wrote the recent book on the firm called “Saudi, Inc.”
The kingdom has in the past used the company as a piggy bank, back when it was still an American company. Since buying a 100 per cent interest in the firm by 1980, Saudi Arabia’s ruling Al Saud family as its sole “shareholder” largely hasn’t interfered in the company’s long-term business decisions as its revenue provides around 60 per cent of all government revenue.
“It’s a trend that I see is disturbing,” Wald told The Associated Press. “It could be potentially damaging to the company, and then in the long term, damaging to the source of funding that has made Saudi Arabia so strong.”
Despite that, Wald said the IPO could prove positive for Aramco in the long term. She anticipated the firm offering as much as 3 per cent of its worth on the Tadawul, with hopes a lot of interest in it would drive up its valuation ahead of a possible foreign listing.
The Future Investment Initiative drew 6,000 people and international firms to Riyadh for a forum that’s the brainchild of the 34-year-old Prince Mohammed. Already, the forum announced Dow Chemicals, HSBC, Samsung and other global firms as partners to the event. Major private equity firms and investment houses also are taking part.
Heads of state are attending, with Indian Prime Minister Narendra Modi and Jordan’s King Abdullah II both scheduled to speak Tuesday. Also scheduled is Jared Kushner, President Donald Trump’s son-in-law and a White House adviser.
The event is held in part at Riyadh’s Ritz-Carlton Hotel, which served as a detention facility during a 2017 purge targeting businessmen, princes and others. Described at the time as an anti-corruption campaign, the arrests targeted wealthy potential challengers to the prince and cemented his grip on power amid allegations of torture denied by the kingdom. Authorities later said it saw the government recoup over $100 billion.
However, there will be big names not taking part. Among them is Jeff Bezos, the CEO of Amazon and the owner of the Post, who had been in negotiations to open data centres in the kingdom before the killing and dismemberment of Post columnist Jamal Khashoggi at the Saudi Consulate in Istanbul.
Khashoggi’s death cast a pall over last year’s forum, which saw Prince Mohammed give a fiery speech in which he described the killing as “a heinous act that is unjustifiable.” However, U.S. officials and a recent United Nations special rapporteur’s report suspect Prince Mohammed had a role in the slaying as members of the team of assassins sent to kill Khashoggi had links to the prince.
As the forum started, panelists like Ray Dalio, the founder of the world’s largest hedge fund Bridgewater Associates, offered stark warnings about the state of the global economy, rising inequality and “a conflict between capitalism and socialism.”
“There’s a form of revolution taking place,” Dalio said.
Kirill Dmitriev, the CEO of Russia Direct Investment Fund, offered a similarly sunny opinion, discussing the “weaponization of ideas.”
“If there’s a major war, or God forbid, nuclear war, nobody will care about monetary policy,” he said. “Those geopolitical tensions need to reduce.”