Some of the world’s top investment bankers gathered at a Riyadh palace on Saturday to deliver their final recommendations on a project that had consumed the government of Saudi Arabia for the past few years: the initial public offering of Saudi Aramco. The financiers were there to meet Yasir al-Rumayyan, the state oil company’s chairman and the head of the country’s sovereign wealth fund, along with cabinet ministers and the company’s leadership. Their message would disappoint the hosts: international investors were unwilling to buy shares in Saudi Aramco anywhere near the $2tn valuation long sought by the kingdom’s powerful Crown Prince Mohammed bin Salman. No amount of sweeteners – from promises of higher dividends to bonus shares for local retail investors – had managed to change that reality.
At the heart of Prince Mohammed’s economic reforms, the IPO was at one time seen as a mechanism to raise $1oobn from a 5 per cent share sale and help open up the Saudi economy to foreign investors. Not only was the size of the listing scaled back, so was its scope, along with any plans to list on international exchanges. Dogged by repeated delays since Prince Mohammed first disclosed his intentions to list shares in Saudi Aramco nearly four years ago, the heir apparent in September put Mr Rumayyan in charge of the IPO process while ousting the kingdom’s powerful oil minister who was seen as an obstacle to the listing. The kingdom’s highest authorities then pushed to get the flotation over the line as early as December on Riyadh’s Tadawul exchange.
The bankers who assembled in the Saudi capital presented the group with what they thought was a moderate proposal to get a deal done and help keep Prince Mohammed’s credibility intact while ensuring his ambitious economic reforms stayed on track. Only a handful of bankers there from the nine global IPO co-ordinators were selected to deliver their recommendations: Bank of America’s Soofian Zuberi, Citigroup’s Tyler Dickson and Morgan Stanley’s Henrik Gobel. Others, such as Mike Daffey from Goldman Sachs, were left to loiter in an anteroom. The banks declined to comment.