The EconomistDecember 7th 2019 651T
he aspirationwas clear. First, list a
portion of Saudi Aramco, a state-owned
oil giant that is the world’s most profitable
company. Then use the windfall to diver-
sify Saudi Arabia’s economy. Muhammad
bin Salman, its crown prince, expected in-
vestors to swoon over the company’s rich
reserves, low costs and $111bn in annual net
income. “If you want to invest in Exxon,
Chevron, bp,” one banker involved in the
listing told The Economist in October, “why
don’t you just go and buy Aramco?” It turns
out that many investors would rather not.
As we went to press, Aramco was ex-
pected to announce its offer price, with
trading to begin soon after. The result is
likely to be the biggest initial public offer-
ing (ipo) in history. It will also prove to be a
disappointment.
Prince Muhammad’s initial desire—a
5% listing at a valuation of $2trn—would
have raised a staggering $100bn, four times
what Alibaba, the current record-holder,
drummed up in 2014. Aramco’s valuation
range of $1.7trn or so is lower than the
princely target but still too high for many
institutional investors. This weak appetite
led the company to decide to float just 1.5%
of its shares on Saudi Arabia’s exchange. It
will probably edge past Alibaba’s $25bn.
The reasons for listing Aramco have not
changed. Saudi Arabia needs to move be-
yond oil, which accounts for nearly 70% of
government revenues. That would be a
dangerous dependence in any era, let aloneone with swelling youth unemployment
and doubts about long-term demand for
fossil fuels in a world worried about cli-
mate change.
If the rationale was straightforward, ex-
ecution was not. Prince Muhammad first
suggested an ipo in an interview with this
newspaper in 2016. The years since have
been filled with delays and controversy.
Concerns about legal liabilities under-
mined plans for a listing in London, New
York or on another global bourse. The mur-
der of Jamal Khashoggi, a dissident jour-
nalist, at the Saudi consulate in Turkey last
year cast a pall over Prince Muhammad’s
sweeping modernisation plan.
Aramco’s successful issuance of $12bn
in bonds in April helped build confidence
in the flotation. Recent months have seen a
frenzy of activity to ensure its success. The
kingdom hired more than two dozen big
banks to shepherd it through, and appoint-
ed a new chairman for the company and a
new oil minister.
The listing was nevertheless marred by
several problems. Some were (mostly) be-
yond Prince Muhammad’s control. Inves-
tors’ concerns about the global economy
and weak demand pushed the oil price be-
low $60 a barrel in August. President Do-
nald Trump’s warnings of a protracted
trade war with China could weaken it fur-
ther. Missile and drone strikes (believed to
have originated in Iran, which backs SaudiSaudi Aramco
Listless
Behold the biggest ipoin history. It looks like an anticlimax
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