That the Saudi Aramco IPO is in jeopardy should surprise no-one
The red carpet has been rolled up to reveal a sizeable bump in the road.
Just a week after the visit to Britain by Saudi Arabia’s Crown Prince Mohammad bin Salman, we’ve learned that the proposed flotation of Saudi Aramco – the world’s biggest oil company and perhaps largest company by market value – has been delayed to next year.
This is not the first time the proposed initial public offering (IPO) has been pushed back. In fact, this little drama has been ongoing for several years.
So we are now told the proposed IPO will not take place until 2019. Just before Christmas the world was assured the IPO would be taking place in the second half of 2018. It had been due to take place in 2017, it was first proposed in 2016 and there had been rumours of a proposed IPO going back to at least 2010.
"I would guess it is about evens that there will be no international IPO," a high-level source familiar with the preparations told Reuters on Tuesday.
Those familiar with this story will struggle to feign surprise. If they were surprised at all, it would be more by the possibility that the source gave the IPO any chance at all.
Preparations for the IPO are apparently proving to be a disappointment.
Rumblings in Riyadh
Part of the problem is that internally Saudi officials can’t agree on whether to hold the IPO in London or New York. Another apparent problem is that Saudi Aramco is struggling to achieve the desired $2trn valuation ahead of the IPO.
This may, however, simply be the Saudis getting their excuses in early.
The same Reuters report on Tuesday morning suggested Riyadh now expects to be awarded emerging market status by MSCI in June.
That would attract Western funds to Aramco as well as investors from China, Japan and South Korea. In which case Aramco might not need a big intentional listing.
The Saudi Aramco IPO has been dangled like a carrot for roughly the same amount of time that Saudi Arabia has been fighting a war with those it considers terrorists in neighbouring Yemen.
Machiavellian ploy?
Is this a coincidence or deliberate strategy? If the latter, it is one of the most cynical Machiavellian ploys in international diplomacy and a rather grim illustration of the regard in which Riyadh holds both Britain and America.
Meanwhile, London and New York have salivated over the prospect of a $2trillion stock market flotation in rather undignified fashion. The Saudis have been courted by both Prime Minister Theresa May and US President Donald Trump, while their actions both internally and in the Middle East as a whole have largely gone without criticism.
Such has been the desperation of London to attract the Saudi Aramco IPO to the UK that we have seen the Financial Conduct Authority consider (FCA) bending, if not entirely breaking, London Stock Exchange listing rules.
And in what must surely rank as the loosest ever definition of international aid, Mrs May agreed a £100m aid package with Saudi Arabia’s Crown Prince at the end of last week.
All in the name of facilitating something that now seems increasingly unlikely to happen. Under such circumstances it is hard to shake the feeling that the West has strung along at best, and been played for a fool at worst.
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