Saudi Aramco has withdrawn from IPO roadshows in the US and London after it’s likely they don’t want to disclose oil reserve totals to Western banks and regulators.
Meanwhile, it’s becoming a giant circle-jerk for the Saudis, the IPO is expected to list on the Tadawul exchange, while the Saudi Arabian Monetary Authority (SAMA) is expected to double the amount it would lend out to domestic “buyers” for IPO purchases, reported Bloomberg.
Aramco set a price range Sunday for its IPO between $1.6 to $1.7 trillion, far below the $2 trillion levels the Saudi crown prince had imagined, but priced higher than most what most institutional analysts thought was possible.
Besides the US and London, the IPO roadshow was also canceled in Canada and even in major financial hubs across Europe this week.
Aramco said Sunday it would sell 1.5% of its shares (3 billion shares) for around $8 per share, valuing the IPO around $25.6 billion.
Over $25 billion would be a record-breaking IPO value amount, which would eclipse the amount Alibaba Group Holding Limited raised in its 2014 IPO debuted.
Aramco’s elevated valuation has been a difficult sell to institutional investors amid the emergence of climate activism in the West, concerns that medium to long-term oil demand is slowing, a global synchronized slowdown gaining momentum, and valuation concerns.
“Institutional investors are unlikely to find this valuation range attractive,” analysts at Sanford C. Bernstein said in a weekend note, adding that Aramco would be trading at a lofty premium to Western oil companies. “Cornerstone investors, sovereign wealth funds and local investors could still provide enough support to support the IPO given some of the strategic interests.”
Notably, even at this lower-than-$2 trillion valuations, it remains notably rich to analysts’ expectations. According to 40% of 24 investors surveyed by Bloomberg, Aramco’s value is between $1.2 trillion and $1.5 trillion. Nearly all banks have huge gaps in their low-end and high-end valuations. The valuations from 16 banks that have come up with estimates range from as low as $1.1 trillion to as high as $2.5 trillion, Bloomberg says, quoting people who have reviewed all estimates.
“Aramco’s price range takes into account some uncertainties that weren’t fully absorbed when the IPO was first floated,” such as governance, Jaafar Altaie, managing director of Abu Dhabi-based consultant Manaar Group, told Bloomberg “The lower range reflects uncertainties. It takes into account issues of supply that are very fluid, and demand that doesn’t look so good now.”
As for now, the Aramco IPO is a giant circle-jerk of domestic investors given cheap credit to buy the IPO via SAMA — the listing on the Tadawul exchange could debut as early as December.