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04 November 2019

Saudi Aramco valuation to be determined in IPO roadshow

More than three years after Crown Prince Mohammed bin Salman first raised the idea and just three weeks after a plan to launch the share sale was abruptly delayed—Saudi Aramco announced its intentions on to list shares on the Saudi Stock Exchange.


The Chairman of Saudi Aramco said that valuation will be determined during the roadshow and book-building of the oil giant’s initial public offering (IPO), reported Bloomberg.

Yasir Al-Rumayyan, the Chairman of Saudi Aramco, said, “Percentage of international versus local investors is still to be determined.”

Currently, the listing of Saudi Aramco is limited to Tadawul and Al Rumayyan said that if Saudi Arabia considers an international listing, it will be in the future.

The state-owned oil company was targeting a $2 trillion valuation—more than double that of Apple—but the Kingdom is now ready to accept a valuation of $1.6 trillion to $1.8 trillion to ensure the IPO is a success.

“This is the right time for us coming to a juncture where we want Saudi Aramco to be a public company to have more disclosure,” said Al-Rumayyan.

According to research sent to potential investors by the banks involved in the company’s listing, Saudi Aramco may be worth as little as $1.5 trillion or even less, well below the target set by the Kingdom.

The pre-IPO research reports, which the banks use to drum up interest on share sales, suggest that Saudi Arabia may fail to achieve the $2 trillion valuation that Saudi Crown Prince Mohammed bin Salman has publicly desired over the last three years.

Bank of America put the valuation of Saudi Aramco at $1.22 trillion as a low case scenario and $2.27 trillion as a high case—a huge gap that is more than enough to fit the combined market capitalizations of Exxon Mobil Corporation, Royal Dutch Shell and Chevron—the world’s three largest publicly-listed energy companies.

Similarly, Goldman Sachs, one of the most influential banks on Wall Street, told investors that it thought the state-owned energy giant was worth between $1.6 trillion and $2.3 trillion.

HSBC, one of the leading banks through the last two years on the IPO process, put the valuation between $1.59 trillion and $2.1 trillion. BNP Paribas, which is playing a role in the IPO too, gave investors a rather precise valuation. The French bank said Saudi Aramco was worth exactly $1.4 trillion.

However, JP Morgan Chase did not offer a valuation but gave investors a full set of financial forecasts for Saudi Aramco. The bank, which has worked for the kingdom for decades, warned that the oil company needs an oil price of $64.2 a barrel to break even this year after paying its hefty dividend. Post-dividend, the so-called cash break-even would drop below $60 a barrel from 2020 to 2023, the bank said in its report.






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