Aramco IPO .. bin Salman's vision at stake and Saudi move cautious

WASHINGTON (Reuters) - Saudi Aramco's valuation remains the most important amid the company's IPO announcement, a Bloomberg report said on Wednesday.

In a New York Times article, Stanley Reid wondered whether Aramco was worth $ 2 trillion, as the Saudi crown prince sees it. Aramco is undoubtedly a huge and highly profitable oil company, but what is the company's value?

That was one of several unanswered questions last Sunday when the company announced it would sell a stake to investors.

The writer noted that anything related to the IPO has yet to be determined in the coming days and weeks, including how much Aramco will sell, and at what price, while most of the questions revolve around the decisions taken by the country's main political decision-maker, bin Salman. Writer.

Aramco, which produces about a tenth of the world's oil, is the centerpiece of Saudi Arabia's economy and generates most of the government's revenue.

Careful move and wrong assessment
Bin Salman has been moving cautiously so far and is only seeking a local listing on the Riyadh bourse, while foreign listing has been delayed in a more complex and dangerous environment such as New York or London, amid some analysts' skepticism.

He adds that the crown prince could back down from the stock offer if conditions change or fail to arouse enough investor interest and willingness, and Aramco has six months to list its shares, as approved by the Saudi Capital Markets Authority two days ago.

Private sector analysts have estimated in recent weeks that the company's valuation of $ 2 trillion is high and illogical, and that the actual valuation is much lower, contrary to what Bin Salman set out more than three years ago.

Analysts at Bernstein Investment estimated Aramco's "fair value" was between $ 1.2 trillion and $ 1.5 trillion.

Analysts say that bin Salman needs to improve his image, especially after the long and costly war in Yemen, and after the murder of fellow journalist Jamal Khashoggi.

Paul Salman, a senior fellow at Chatham House, a London-based research organization, said Ben Salman could not afford another failure and that people are already beginning to question his competence and ideas, adding that Stevens and others consider Bin Salman's assessment of Aramco a serious mistake.

Investors need independent valuation
In a separate report, Bloomberg quoted a number of authors that bin Salman's vision is at stake following the start of the Aramco IPO.

In their joint article, Matthew Martin, Javier Blas and Archana Narayanan say the Aramco IPO is the key to Bin Salman's grand plan to reduce dependence on oil.

The article adds that Saudi Arabia is trying to avoid all obstacles to ensure the success of the initial public offering of Aramco after bin Salman finally decided to launch this offer.

According to the Bloomberg report, the Saudi government has acknowledged that Aramco may not really deserve the $ 2 trillion valuation that Bin Salman has long defended.

The kingdom aims to estimate between $ 1.6 trillion and $ 1.8 trillion, Bloomberg quoted informed sources as saying.

More than three years after bin Salman announced Saudi Arabia's intention to go public with Aramco for the first time, the company announced last Sunday the initial public offering, the most dramatic step in the Saudi oil industry since the nationalization of the company in the 1970s.

The IPO is the cornerstone of Bin Salman's Vision 2030 to make the economy ready for the post-oil era.

According to a Bloomberg report, analysts at banks working on the deal offered very mixed estimates. Goldman Sachs told investors that Aramco was worth between $ 1.6 trillion and $ 2.3 trillion. Bank of America Corp., also involved in the deal, put the value at only $ 1.2 trillion, while BNP Paribas estimated it at $ 1.42 trillion.

With Aramco hiring more than 20 banks on the IPO, investors have few options to seek independent sources, but some of the institutions have started publishing their valuations, the report said.

Wealthy Saudi Arabia
Sanford C. Bernstein said the fair value of the valuation ranges from $ 1.2 trillion to $ 1.5 trillion, far less than what banks operating under the IPO had expected, according to Bloomberg.

Global banks have been at odds over the role of the deal, and more than 20 banks have been assigned to take over, with senior roles being distributed to companies such as Citigroup and JPMorgan.

To complete the deal, bankers will need massive contributions from Saudi Arabia's wealthiest families, many of whom may have been targeted during the 2017 corruption campaign, when dozens of wealthy citizens were detained at the Ritz-Carlton in Riyadh, according to a Bloomberg report.

Aramco needs to deal with the growing global movement against climate change targeting the world's largest oil and gas companies, the report says. Investors will also have to consider how to deal with the growing geopolitical risks following the September attacks on Aramco, which highlighted the company's vulnerability to regional military threats.