Saudi Aramco signals fresh momentum behind IPO plans

Significance

Reports last month that Aramco had selected Lazard for a contract to work as adviser on the IPO breathed new life into a deal that has been marking time since mid-2018. Prospective investors have also been encouraged by Aramco’s recent announcement of interim results, marking a further development in public disclosure following the successful 12-billion-dollar bond issue in April. The original plan was to offer a 5% stake to generate 100 billion dollars for the Public Investment Fund (PIF), based on a 2-trillion-dollar valuation.

Impacts

• The new advisory team may recommend modifying the planned IPO terms, especially given Aramco’s acquisition of 70% of SABIC.
• The IPO will give Aramco an opportunity to elaborate further its long-term strategy to adapt to the global shift away from fossil fuels.
• A listing of Aramco’s shares would boost Saudi market capitalisation and attract additional investment inflows.
• The interests of new minority shareholders and the dominant state shareholder could diverge, including over dividend policy.