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| Biggest public listing in history put on hold over valuation fears | Biggest public listing in history put on hold over valuation fears |
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| A partial float of the Saudi oil giant Aramco – the biggest public listing in history – has been “indefinitely postponed” because of fears that its valuation would be much less than expected, according to senior regional sources. | A partial float of the Saudi oil giant Aramco – the biggest public listing in history – has been “indefinitely postponed” because of fears that its valuation would be much less than expected, according to senior regional sources. |
| The decision was made earlier in the summer but has been kept under wraps by officials who were worried that shelving what was intended to be the centrepiece of Saudi Arabia’s economic transformation plan may dent investor confidence in the Kingdom, two financiers with knowledge of deliberations revealed. | The decision was made earlier in the summer but has been kept under wraps by officials who were worried that shelving what was intended to be the centrepiece of Saudi Arabia’s economic transformation plan may dent investor confidence in the Kingdom, two financiers with knowledge of deliberations revealed. |
| The development, first reported by Reuters, is a blow to the stock markets in New York and London, which had vied to host the listing. | The development, first reported by Reuters, is a blow to the stock markets in New York and London, which had vied to host the listing. |
| The UK government was forced to deny last November that a $2bn (£1.5bn) loan to Aramco was an inducement to bring the float to the London Stock Exchange. | The UK government was forced to deny last November that a $2bn (£1.5bn) loan to Aramco was an inducement to bring the float to the London Stock Exchange. |
| The final valuation of the 5% stake that was to have been offered to investors has remained hotly contested, with Saudi officials claiming it could be as high as $2tn, while senior financiers have been much more bearish. | The final valuation of the 5% stake that was to have been offered to investors has remained hotly contested, with Saudi officials claiming it could be as high as $2tn, while senior financiers have been much more bearish. |
| The lack of agreement on a valuation had been central to the listing’s delay. The state-owned behemoth’s bookkeeping had proved difficult for forensic accountants and senior analysts to break down, in turn making a true value of the stake difficult to discern. | |
| Reuters suggested that the kingdom had instead shifted focus to taking a strategic stake in petrochemical maker Saudi Basic Industries. Such a claim has taken root in recent weeks in Riyadh, London and New York, where teams of foreign analysts who had been structuring the listing have been quietly disbanded since June. | Reuters suggested that the kingdom had instead shifted focus to taking a strategic stake in petrochemical maker Saudi Basic Industries. Such a claim has taken root in recent weeks in Riyadh, London and New York, where teams of foreign analysts who had been structuring the listing have been quietly disbanded since June. |
| “It’s known mostly in a small [Saudi] financial circle,” said a regional source with knowledge of deliberations. “The alternative would be to revalue [Saudi Aramco’s] reserve prices according to future oil market price estimates, rather than the current internal company estimates.” | |
| The true value of Aramco, which presides over the world’s largest proven oil reserves, has never been known. Saudi Arabia’s crown prince, Mohammed bin Salman, who has been tasked with reforming the country’s public sector, had viewed the partial float as a golden egg which could unlock wealth essential for a raft of ambitious private sector plans. | |
| Speculation that mooted valuations were not being matched by fundamentals had been widespread in financial circles. | Speculation that mooted valuations were not being matched by fundamentals had been widespread in financial circles. |
| There has also been concern across the region that the scale of the economic reform programme could be slowed, or even stalled by structural inefficiencies in labour markets, and an investment climate that had led to many of the country’s business leaders being detained last year, and forced to sign over a portion of their assets to the state. | |
| Salman said the detentions were part of a crackdown on endemic corruption, and designed to put the kingdom on a new footing – where prospective investors did not have to pay bribes or partner up with a senior official to do business. | |
| However, some international investors say they have been rattled by the turmoil, and had aimed to wait for the political climate to stabilise – and for Aramco to be successfully listed. | However, some international investors say they have been rattled by the turmoil, and had aimed to wait for the political climate to stabilise – and for Aramco to be successfully listed. |
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| Mohammed bin Salman | Mohammed bin Salman |
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