Saudi Aramco is pushing to complete its initial public offering (IPO) this year by relying more on local investors after international money managers’ skepticism triggered a brief delay, reported Bloomberg.
The state-owned oil producer is considering making a formal announcement of the listing plan as soon as the next few weeks.
The energy giant plans to press on with the listing plans by relying more on demand from Saudi Arabia and other parts of the Middle East. Some domestic funds have been invited to a meeting at Saudi Aramco’s headquarters in Dhahran this week to discuss the IPO and may be asked for commitments shortly afterward.
While Saudi Aramco may need to reduce its valuation expectations below the initial $2 trillion target, local institutions are seen as less sensitive to the pricing. The world’s most profitable company has not finalised a new timetable and the schedule for the share sale could still be pushed back again.
The process has been rocky from the start, with several delays since Crown Prince Mohammed bin Salman first mooted the IPO project in 2016. Plans were revived early this year before facing a setback after an attack last month on the company’s biggest processing plant.
Whether Aramco can still succeed in listing this year will depend on whether it can drum up enough demand from Saudi investors as well as the regional funds it’s been approaching.
The Saudi government is seeking investments from the Kingdom’s wealthiest families for the IPO. The Crown prince wants the proceeds from IPO to feed the Public Investment Fund, the sovereign wealth fund charged with making the Kingdom’s economy less dependent on oil.
The oil market may also be concentrating minds on getting the deal done. The International Energy Agency expects crude supply to outstrip demand by more than a million barrels a day in early 2020, putting pressure on Saudi Arabia and the rest of Organisation of Petroleum Exporting Countries (OPEC)to cut production.