Saudi Aramco looks set to delay its long-awaited initial public offering (IPO), according to a report by the Financial Times.
The report cites “three people familiar with the matter” who state that the company has delayed the IPO, which was due to take place at Dhahran on 20 October, and would put its planned November flotation in jeopardy. Another source stated that although the IPO would be delayed by weeks it would not be cancelled entirely.
Saudi Aramco said that: “The company continues to engage with the shareholders on IPO readiness activities. The company is ready and timing will depend on market conditions and be at a time of the shareholders choosing.”
It is believed that the company’s Q3 results are “very good” so delayed until after their release would help boost the valuation.
Saudi Aramco is expected to list up to 3% of its company and is also expected to release a prospectus for the IPO after the 20 October.
The rocky road to the IPO
Saudi Aramco is regarded as the most profitable company in the world, with a net income of $111.1bn in 2018. Despite this, Saudi Aramco has struggled with the development of the IPO since it was first announced it in 2016.
The company hopes that the offering will lead to it being valued at $2tn, which is seen as being too high for foreign investors. A Market Line report from August 2019 stated that in order for the IPO to be successful it must lower its valuation from $2tn to $1.5tn to attract investment from around the world.
There are also concerns about the Saudi state’s excessive interference in the IPO, as it is believed that is pressuring Saudi investors to contribute to the IPO.
The recent drone attacks on Saudi Aramco facilities may have also hampered efforts, despite CEO Armin Nasser stating that the company would press on with the offering.
Saudi Aramco IPO Reaction
Wall Street Journal law bureau chief Michael Amon tweeted: “Aramco’s disappearing reappearing IPO is beginning to disappear again.”
Aramco's disappearing reappearing IPO is beginning to disappear again. https://t.co/qs3CI6kMT1
— Michael Amon (@michaelkamon) October 17, 2019
Echoing this, Market Crumbs founder Hipster tweeted: “Things that will never happen. US-China trade deal, Brexit and Saudi Aramco IPO.”
Things that will never happen:
-US, China trade deal
-Saudi Aramco IPO
— Hipster (@Hipster_Trader) October 17, 2019