Aramco's IPO is central to Saudi Arabia's Vision 2030 reform plan.
The record initial public offering of Saudi Aramco could happen before the end of the year, with a domestic listing in Riyadh to be followed by an international one, most likely in Tokyo, next year.
The recent appointment of Yasir Al-Rumayyan, governor of the Public Investment Fund (PIF), the powerful Saudi wealth fund, as chairman of Aramco is seen as preparation for the IPO. The actual timing could be affected, however, by the September 14 attacks on Saudi oil facilities, which knocked out approximately 50% of the country’s oil production. Investment bankers launched the underwriting process for the IPO in Dubai just days before the attacks on the company’s facilities.
The surge in crude prices that followed the attacks could boost the valuation of Aramco closer to the $2 trillion sought by Saudi Crown Prince Mohammed bin Salman (MBS), but it also could raise questions about the safety of Aramco’s assets.
“Preparations for the sale have been ramped up over the past month or so, but these latest attacks may end up denting investor appetite for Aramco shares and, as a result, weigh on the valuation of the firm,” says Jason Tuvey, senior emerging markets economist at Capital Economics. “The sale could end up by being delayed [again],” he says.
Al-Rumayyan replaces the former energy minister, Khalid Al-Falih, as chairman of Aramco. Al-Falih was opposed to a fast sale of the company, whereas MBS is anxious to get the listing done as soon as possible, since it is at the center of his Vision 2030 reform plans.
The Aramco assets will be transferred to the PIF following the IPO, which will make the PIF the world’s largest sovereign wealth fund.
“Our nation holds strong investment capabilities, which we will harness to stimulate our economy and diversify our revenues,” MBS stated in announcing his Vision 2030 program, which is designed to turn the PIF into a global investment powerhouse. The PIF already has taken major stakes in technology companies, and has boosted its number of employees from 60 to 700 in the past three years.
MBS said he eventually wants to list 5% of Aramco.