ASSESSMENTS

The Saudi Aramco IPO Will Hit Its Valuation Goal but Fail to Fund Vision 2030

Dec 4, 2019 | 11:00 GMT

This photo shows a sign for Saudi Aramco's initial public offering during a news conference in Dhahran, Saudi Arabia, on Nov. 3, 2019.

This sign was used during a news conference in Dhahran, Saudi Arabia, announcing Saudi Aramco's planned listing on the Riyadh stock exchange. The state-run oil company's initial public offering will hit its target valuation range when final pricing is announced Dec. 5 but will fail to attract meaningful foreign participation.

(AFP via Getty Images)

Highlights

  • The Saudi Aramco initial public offering on the domestic Tadawul stock exchange will be able to sell the shares at its target valuation when final pricing is announced Dec. 5, with trading to begin Dec. 11.
  • It will fail, however, to attract meaningful foreign participation other than from Abu Dhabi, or draw in external capital for investment in Vision 2030 projects.
  • The process by which Saudi Arabia has reached this point has led to Crown Prince Mohammed bin Salman's sidelining of competent technocrats in favor of his close associates and will do lasting damage to prospects for foreign investment.

As the Saudi Aramco initial public offering (IPO) culminates this week with the final pricing announcement on Dec. 5, some observers will tout it as a success for having reached the notional valuation range of $1.6 trillion to $1.7 trillion for the company set on Nov. 17 in the prospectus. In domestic Saudi political terms, the IPO will be seen as a major achievement for Crown Prince Mohammed bin Salman and his Vision 2030 campaign. In reality, though, it will fail on two more important metrics. It will not bring in a substantial amount of foreign money to invest in the economic diversification projects envisioned under Vision 2030, other than $1.5 billion from Abu Dhabi. It also has not played out in accordance with the expectations of transparency and sound management laid out when the crown prince announced the idea more than three years ago in his landmark interview with...

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