By Will Kennedy and Dinesh Nair
Saudi Aramco’s stop-start initial public offering was delayed again just days before a planned launch as doubts re-emerged about the $2 trillion valuation placed on the state oil giant by Crown Prince Mohammed bin Salman.
The postponement, by at least a few weeks, will allow the array of Wall Street bankers advising Aramco to incorporate third-quarter results into their pre-IPO assessments of the company, according to people briefed on the situation. The banks are still struggling to meet the valuation the company is seeking, according to one of the people, who asked not to be named discussing private deliberations.
Aramco, which pumps about 10% of the world’s crude oil, said in a statement that the timing of the IPO will depend on market conditions and that it continues to engage with shareholders on activities related to the listing.
The sudden delay disrupts the carefully choreographed plan to launch the share sale on Oct. 20, followed a week later by intense promotion during the country’s big investment forum — dubbed Davos in the Desert — and ending with an IPO in late November. Now, a listing is unlikely before December or perhaps January.
Last year, Aramco delayed the IPO after more than two years of preparations as international investors balked at the crown prince’s $2 trillion valuation.
This time Saudi Arabia opted for an easier route, deciding to start with a local listing only in Riyadh — ditching plans for a sale in London or New York — and enlisting local banks and wealthy families to support the IPO.
The Saudi government had seemed determined to press on with an accelerated schedule even in the face of potential headwinds: weak oil prices, a slowing world economy and last month’s attack on the company’s biggest processing plant.
While details of the proposed offer haven’t been made public, people involved in the transaction said earlier this month that about 2% of Aramco might be sold, raising $40 billion and easily exceeding the $25 billion raised in 2014 by Chinese e-commerce giant Alibaba Group Holding Ltd.
Ever since the Crown Prince first mooted the the IPO of the kingdom’s most prized assets in early 2016, Aramco’s valuation has been contentious. Many analysts have said that $2 trillion is too much compared with similar publicly traded companies.
Aramco may well be the world’s most valuable company, but based on the dividend yield received by investors in Exxon Mobil Corp., the largest U.S. oil company, its valuation would be closer to $1.5 trillion.
The Sept. 14 attack on its oil facilities disrupted output and sent shock waves through energy markets, triggering the biggest one-day jump in Brent crude prices on record and stoking security concerns. Investors are already demanding a premium to hold the country’s debt, downgraded this month by Fitch Ratings Ltd.
While advisers had been working on announcing an intention to float for Oct. 20, executives hadn’t given a firm timeline in public. Aramco Chief Executive Officer Amin Nasser said last month that the IPO would happen “very soon.”
The IPO promises to be a fees bonanza for the more than two dozen advisers working on the share sale, with Aramco set to pay them $350 million to $450 million, people familiar with the matter said Wednesday.
The delay to the IPO’s launch was reported by the Financial Times earlier.