The public listing of Saudi Aramco, possibly the largest IPO in history, looked very good on paper. However, the listing was postponed to the latter half of the year, and further complications could postpone it further. Saudi Aramco CEO Amin Nasser has suggested on Monday the possibility that it could take place as far as in the second half of 2018.
In effect, the drop in oil prices, in particular, could threaten the listing, with some experts saying a rebalancing of the commodity to near 60$ a barrel would be necessary for the Kingdom to move forward – price that has not been such since 2015.
“An IPO wouldn’t make sense given current oil pricing “– Said Florence Eid-Oakden, Chief Economist and CEO of Arabia Monitor. The price of oil will have to be “optimal”, she said, suggesting a price-per-barrel of around $60.
The oil giant plans to list on NYSE, as this is the first choice of the royal family, and of Prince Salman in particular, as it would provide access to the world’s largest pool of capital, and is viewed as a way to solidify the Saudi-U.S. relationship.
While global issues threaten to delay the listing, domestic pressures may keep it on schedule. Aramco’s IPO is part of a larger economic package – – called Vision 2030 – intended to diversify Saudi Arabia’s economy, improve the country’s transparency, disentangle the royal family from business dealings, and encourage foreign investment.
Seznec said the listing is not designed just to raise money- but that money could be useful. Saudi Arabia has been whipping through its foreign reserves recently, principally due to the war in Yemen, and declining oil prices.
An IPO that could generate up to $100 billion for the country could ease off the strain on the reserves, which might prove tempting.
“The war in Yemen confirms the need to diversify resources”, Eid-Oakden said.
She added that the war in Yemen is only one example of Saudi Arabia’s plans for a more proactive foreign policy – and that could require a lot of money in the years to come.
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