Global investors remain in the dark about what valuation Saudi Crown Prince Mohammed Bin Salman (MBS) and the Saudi government are seeking for Aramco, the national oil company, following another delay to the jumbo IPO. Many are unconvinced by the $2tr figure that has been widely touted and fed up with the continued speculation and lack of detail.
“We don’t know whether we are going to care about the deal itself until we see some hard numbers. We are sceptical about a valuation of $1.5tr, or even $2tr,” said an equity capital markets investor at a large global asset manager. “It is one of these huge things that everyone is talking about all the time, but all the speculation is very frustrating. Whether it comes this week, next week or next year is not that consequential, but we can’t get excited about it because until the deal launches we don’t know whether we are going to be interested in buying it.”
Reports in the Middle East have said Aramco wants to release its third quarter results before launching the IPO, so that it can assuage investors’ concerns over the damage caused by a drone attack on two of its oil processing facilities in September.
Alarm
Several sources close to the deal have expressed concern that the attack could alarm international investors. They hope Aramco’s vast profits will persuade buyers that the IPO does not warrant a heavy political risk discount.
If Aramco can prove that the attacks did not have a material economic impact, then investors might increase their valuations.
But IPO sellers globally are facing difficulties and many market participants sense that Aramco, regardless of the attacks, might struggle to achieve the $2tr valuation so keenly desired by MBS. Sources suspect that Aramco may also have had market reasons for delaying the launch of the deal.
“Unless you had to list now I don’t know why you would. We’ve seen in Europe this week that the market was difficult, with a number of IPOs pulled,” the asset manager added.
A source close to the transaction confirmed that the timeline had been delayed but was still confident the deal would go ahead eventually, adding: “ultimately the deal is fine”.