Saudi Aramco May Ditch International IPO Plans: FT

Apparently, Riyadh is about to throw in the towel on an international IPO forSaudi Aramco.

As you’re probably aware, this process has been fraught with difficulty from the very beginning as questions about valuation, transparency, and state control have created stumbling block after stumbling block.

Now, according to FT, they’re thinking about scrapping it in favor of a private offering to SWFs and institutions. “Talks about a private sale to foreign governments – including China – and other investors have gathered pace in recent weeks,” FT reports, citing five sources familiar with the discussions.

Under the revised plan, Saudi Aramco would still list in Saudi Arabia next year, but an international listing likely wouldn’t come until 2019 at the earliest. 

Notably, Beijing is said to be “close to playing a key role” – whatever that means.

The obvious question here is what this means for bin Salman’s “Vision 2030” and for the crown prince’s economic reform platform more generally.

This could be a gambit to avoid questions about valuation. “A combined private placement and domestic listing, which would be easier to execute, would boost the company’s valuation and bolster the development of the Saudi market,” FT continues, citing another official.

While that may be true, it would be suboptimal versus New York or London for obvious reasons and it’s not 100% clear if the Saudi market could even handle a listing of that size.

But the royal family is reportedly worried that a U.S. listing would create legal risks tied to legislation that allows 9/11 victims to sue the kingdom, while listing in London would mean pulling back the curtain on Aramco to a degree Riyadh is reportedly not comfortable with (imagine that).

As FT also notes, “it is unclear if this new proposal is backed by Prince Mohammed and there is no guarantee it will go ahead.” That right there is key. We’ll say it again: the obvious question here is what this means for bin Salman’s “Vision 2030” and for the crown prince’s economic reform platform more generally.

Stay tuned.