09 April 2018

Saudi could go it alone on Aramco IPO

Can Saudi go it alone?

A global Saudi Aramco IPO would be world's largest IPO and a bonanza for dealmakers and law firms

From a technical and regulatory perspective Saudi Arabia’s stock exchange is capable of handling the planned Saudi Aramco initial public offer alone if necessary, according to Chief Executive Officer of the Saudi Stock Exchange (Tadawul) Khalid al-Hussan. The exchange expects an influx of foreign funds to smooth the listing of national oil firm Saudi Aramco, despite doubts from some analysts, the exchange’s chief executive explained on Sunday.

IPO date uncertain
However, the Tadawul chief did not discuss the timing of the Aramco IPO, which could be the world’s biggest, with global dealmakers and lawyers across the financial markets keeping close tabs. Saudi Crown Prince Mohammed bin Salman stated it could occur at the end of 2018 or in early 2019, depending on market conditions. If Saudi decision-makers are relying on foreign fund inflows to facilitate the IPO, then early 2019 is more likely. “Foreign investors are putting in more money — every day we have improved liquidity capacity,” Khalid al-Hussan said.

Too ambitious
Many private analysts think the $100 billion target for the IPO is too ambitious, and even at $50 billion it could strain the Saudi market, which has a capitalization of about $500 billion. However, many changes are happening in Saudi, including a change in rules to permit foreigners to take part in local IPOs. Last month, equity index compiler FTSE Russell upgraded Saudi Arabia to emerging market status. When the government announced plans to sell about 5 percent of Aramco to raise over $100 billion, an IPO was expected by the end of this year, with possible listing list on foreign markets including New York, London and Hong Kong.