Ryad (AFP)

The Saudi oil giant Aramco has revised its objectives down for its IPO, announcing Sunday that its valuation could reach 1.710 billion dollars, far enough from the 2,000 billion a time targeted by the Crown Prince.

The economic gem of the Saudi kingdom said in a statement that it would introduce 1.5% of its shares on the Tadawul, index of reference of the Stock Exchange of Ryad, specifying that it could earn between 24 and 25.5 billion dollars .

If the valuation remains below the hopes of Crown Prince Mohammed bin Salman, the operation could still compete with the largest IPO in history: the Chinese e-commerce giant Alibaba, which had raised 25 billion euros dollars in New York in 2014.

Sunday marks the first day of the Aramco share subscription period, with a range of 30 to 32 riyals ($ 8 to $ 8.5). The final price will be fixed on December 5th, one day after the end of the subscription period, according to the prospectus published by the company a week ago.

Aramco, which produces about 10% of the world's oil, is considered the pillar of the economic and social stability of the kingdom, the world's largest exporter of crude oil.

Its IPO, repeatedly postponed, is the cornerstone of the Crown Prince's reform plan to diversify the economy of the ultra-dependent oil kingdom by investing funds in pharaonic development projects and in industries outside the oil sector. .

According to the rating agency Standard & Poor's, the transaction could help Saudi Arabia consolidate its financial situation: "If the funds raised are then used effectively, they could allow the country to support its long-term growth. ".

- "Patriotic Duty" -

"The price (announced by Aramco) is a reasonable compromise and it will sell (shares)," Tarek Fadlallah, executive director of the Middle East branch of Nomura Asset Management Company, told Twitter.

If the price reaches the top of the range, the operation could overshadow that of Alibaba, he added.

Saudi Arabia has made spectacular efforts to make this operation a success, prompting wealthy Saudi families and institutional actors to invest, some even calling the act a "patriotic duty."

Last week, Sheikh Abdullah al-Mutlaq, a member of the country's highest religious body, urged the Saudis to invest in a local television channel, saying it was allowed by Islam and some religious clerics would even participate in the IPO.

The operation is generating enthusiasm at the local level but, despite an intense promotional campaign, there are reports of difficulties for Aramco to attract foreign institutional investors, with uncertain prospects for the energy sector and fears about the transparency and governance of the Saudi giant.

- Potential risks -

In a prospectus of more than 650 pages, Aramco listed the potential risks for investors: the possibility of "terrorist" attacks, geopolitical tensions in the region, foremost among which is the rivalry between the kingdom and Iran.

Another factor likely to make investors hesitate is the possibility that global demand for hydrocarbons will decrease structurally over the next 20 years, according to IHS Markit. Climate change is cited as one of the reasons that could drive down demand.

Investors and experts were expecting an initial Aramco IPO plan with two components: the introduction of 2% of the capital on Tadawul, the benchmark index of the Ryad Stock Exchange, followed by the introduction of 3 % on an international stock market.

But the company claimed that no plan for an introduction abroad was on the agenda at the moment, showing that targets announced as early as 2016, when the IPO had been announced, were put in place. side.

This is not the first time that Mohammed bin Salman's plans have been thwarted, as the IPO has been repeatedly postponed due to adverse market conditions and falling oil prices, on which the Bank's results depend. 'business.

In 2018, Aramco's net income was $ 111.1 billion. In the first nine months of 2019, net income declined 18% to $ 68.2 billion.

© 2019 AFP