Skip to comments.New Aramco IPO Deadline Looms -- Energy Journal
Posted on 11/18/2019 1:08:59 PM PST by SunkenCiv
The oil giant released a valuation target ranging from $1.6 trillion to $1.7 trillion. The figures fall short of the $2 trillion target Saudi Crown Prince Mohammed bin Salman has been fixed on for more than two years. The difference in value illustrates the operational, geopolitical and governance risks that investors face betting on the offering, writes Ben Dummett.
The IPO still has potential to be the world's biggest by surpassing the $25 billion Alibaba raised in 2014. But the stock listing is beginning to reveal a set of dueling interests for Saudi Arabia. Saudi leadership wants the stock offering to be a success, but the kingdom's OPEC commitments -- and oil market realities -- could get in the way, as Benoit Faucon observes in his Reporter's Notebook (below).
The Saudis are telling investors that the world's most profitable oil enterprise can grow cash flow from its operations and thereby have no trouble funding a dividend. But that promise could someday find itself at odds with Saudi Arabia's role as a swing producer, able to balance global crude markets by increasing or decreasing production when needed.
Aramco continues to market the listing to retail and institutional investors in Saudi and the surrounding region, but it can still decide to halt the IPO if its valuation expectations aren't met.
(Excerpt) Read more at blogs.wsj.com ...
The article in entire was available within my brokerage acc't, if you have one, try that, and don't write in about paywalls, okay? No one cares.
Yeah. I imagine Saudi Arabia would be able to revoke your ownership in Aramco at a moments notice. And imagine if they ever had an Iranian style theocratic revolution. Wouldn’t go near it with a ten foot pole.
One is buying a stock where the company does not serve the stock holders interest but the interests of the Saudi government.
Yup. They stole the company from shareholders in the 70s and 80s. If it served their purpose in the future, they wouldn’t hesitate to do it again.
I do not think they would re-nationalize this small percentage of ownership. The Saudis would just say...No Dividend For You!!!
Have they actually opened their books? I am asking because I do not know. And can they be trusted?
From what I understand no. There are debates on fundamental questions, for example, proven reserves. The IPO will be through the Saudi stock market so they do no have to follow SEC rules and like for disclosure.
35% net profits on sales. Lol. Seems almost too good to be true...
The Saudis will hold controlling interest. The amount of money from a successful (up to $2 t) IPO would be transformative to the House of Saud (rich as it already is) and the Kdm, and keeping investors in dividends would be a priority, even if it spends time in / deteriorates into a sort of Ponzi scheme. When I think of what Sheik Yamani said in interview some years ago (after he re retired as Saudi oil minister) -- "the Stone Age didn't end because people ran out of stones" -- it's clear that they know the gravy train left them behind on the platform long ago. The 1973 OPEC embargo turned out to be major turning point in their education, as they discovered that the temporary impact in their wielding of it also failed to produce the desired outcome, and instead brought them into the real economy of the world, and led to a massive increase worldwide in the proven reserves of oil.
From what I read, extracting Saudi oil is very inexpensive around $9 per barrel with only $3 of that the marginal costs of pumping the oil. As a comparison, Canadian oil costs $26 per barrel to extract from the oil sands. Whether that translates to a 35% net profit margin I do not know.
Of course didn’t read it.... Whats the opening price target per share?
Let me guess, regular people have zero chance to buy it at the IPO prices, but Congress can and will.
Regular people will have to be able to trade on the Saudi exchange, if memory serves; the way to invest indirectly is to nab shares of various banks and underwriters based in the US.
Yeah, just pondering it now. Not only are they in a very fortunate position, as far a oil extraction goes, they probably have no minimum wage, no unions, no environmental regulations, no zoning problems... Not to mention they are part of a cartel. Hell, anyone could make 35% under those circumstances.
1.5% of the company, 3 billion shares, a bit more than $8 a share.
The price at the wellhead for the Saudis hasn't budged much in straight dollars (was about $8 in 1973, prior to the embargo), and that's not taking inflation into account -- their cost has actually declined over the last 46 years.
And my apologies, the IPO isn't the whole company, but it's still slated to be over a couple dozen billion dollars. The value of Aramco would be a paper value. Assuming that there isn't a decline from the IPO price, the House of Saud wants a valuation for Aramco of $1.7 to $2 trillion, a stunning amount.
Saudi Aramco IPO prospectus released but key details absent
5:21 AM ET Mon, 11 Nov 2019
CNBC’s Hadley Gamble and Steve Sedgwick discuss the mega initial public offering that has almost 30 investment banks working on it.
Apropos of nothing:
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