“The biggest question is would the IPO go ahead as planned with two earlier failed attempts”, says Dr. Nafis Alam, professor of Finance and Head of School of Accounting & Finance at Asia Pacific University.
“The investors will be skeptical, given that there is no concrete evidence on the actual quantum of oil reserves in the Saudi, and especially how much Aramco has in its reserve”, he detailed.
The company was forced to delay its IPO following a drone and missile attack in September that shut down half of its oil production.
Riyadh pointed the finger at Iran, but Yemen’s armed Houthi political opposition faction claimed responsibility for the strike. According to Alam, geopolitical risks in the Middle East region will be another major concern for investors.
Riyadh reportedly expects the IPO to value the oil giant at some $2 trillion, the largest such valuation in history, while the markets are suggesting $1.5 trillion.
“The final value of the IPO will depend on how much demand there is from Saudi, regional and international investors, but it will be too early to determine the percentage of international investors versus local investors”, Alam noted.
He added that the company is the kingdom’s crown financial jewel and the biggest investors are expected to come from the Middle East, especially the Gulf Cooperation Council nations, if the IPO goes as planned by the end of 2019 or early 2020.
Plans for the IPO were first announced in 2016 as part of Saudi Arabia’s Vision 2030 economic overhaul programme, aiming to diversify its oil extraction-based economy.
“From the Saudi economy perspective, it might be one of the last resorts for the government to provide a lifeline to the ailing Saudi economy as the IPO can fetch in close to 40 Bln USD to boost the economic activity in the country”, Alam opined.