Is The Aramco IPO On The Brink Of Collapse?

Authored by Nick Cunningham via,

In what could be a humiliating decision, Saudi Aramco is considering not staging an IPO next year as planned, due to the difficulty of pulling off an international listing.

On Friday, the Financial Times reported that Aramco is weighing a different strategy: selling stakes in the company to private investors and sovereign wealth funds. No final decision has been made yet, but there are several potential paths forward, including a public listing on Saudi Arabia’s domestic stock exchange plus a private sale. Or a private sale followed by an international listing, but maybe not until 2019.

Aramco officials tried to beat back the report, insisting that everything is moving forward as planned. “A range of options, for the public listing of Saudi Aramco, continue to be held under active review. No decision has been made and the IPO process remains on track,” Saudi Aramco said in a statement, according to the FT.

However, Reuters echoed the FT, reporting on Friday that Aramco was in talks with a Chinese investor.

Saudi officials, according to the FT, are concerned about the legal risks involved in taking the company public. The powerful crown prince has favored a New York listing, due to the political alliance with the U.S., while some Aramco officials and financial advisors prefer a less risky listing in London. A New York listing could expose Aramco to legal action stemming from Saudi Arabia’s alleged role in the 9/11 attacks—legislation passed by the U.S. Congress in late 2016 authorizes lawsuits from 9/11 victims against Saudi Arabia.

But a London listing is apparently not that much more attractive. Saudi sources told the FT that Aramco would face tough legal scrutiny there as well.

Those roadblocks have led to second thoughts on the IPO altogether, with Saudi officials reportedly now considering a private sale.

After hyping the IPO for more than a year, shelving the plans would amount to a significant climb down for the state-owned oil company.

On the other hand, as Bloomberg Gadfly points out, there are also upsides to a private sale that go beyond the difficulties of listing in New York or London. For instance, if Aramco attracts a disappointingly low sale figure, that figure could remain undisclosed if the sale was private. Also, Saudi Arabia could deepen its ties to Asia if it makes a private sale to major investors in China or India. Finally, Aramco would not have to publish estimates on its oil reserves – a long held state secret.

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