Saudi Aramco's Record-Breaking $50 Billion Foreign Listing Is Back On: WSJ

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by Tyler Durden
Saturday, Feb 05, 2022 - 12:40 AM

Nearly two years have passed since Saudi Arabia - having been shunned by the West in the wake of the killing of Jamal Khashoggi - finally abandoned its hopes for an international IPO in New York, London or perhaps even Hong Kong in favor of a much smaller listing on the Saudi Tadawal. 

Aramco's Tadawul debut coincided with an internecine price war within OPEC+, which - along with pressure from President Trump were keeping prices high - had helped to keep crude and natty gas prices low for years, until the arrival of COVID. Fast forward to today, and prices of WTI and Brent crude are trading at levels unseen in more than a decade, potentially precipitating a series of energy crises across Europe.

And so, WSJ reported Friday morning that after months of radio silence, Aramco's management has decided to revive its plans for a foreign listing at a time when global stock exchanges - not only in the US - are desperate to make up for all the business they have lost out of China.

Management wants to sell up to $50 billion in shares (roughly 2.5% of the company) perhaps in London or Singapore, while also raising some of the money in a secondary offering in Riyadh.

Aramco remains the world's largest oil and gas company - and one of the world's most valuable companies, by any metric - and the $50 billion offering would be the largest single slug of stock sold anywhere, ever.

But of course, all of this is still in the "planning stage", which means who knows if it will ever happen - or if the Saudis will back out again (or perhaps be derailed by another international human rights scandal).

The listing of shares would be by far the largest in the history of capital markets and could prove difficult to pull off. The company set the previous record for the world’s largest initial public offering in 2019 when it raised $29.4 billion on the Tadawul, or the Saudi stock exchange.

The stake-sale effort is still in the planning stage, and could still be delayed or changed, the people said. Riyadh has floated several different plans over the years aimed at raising funds via Aramco, some of which have ultimately faltered or been abandoned.

Originally, Aramco had set out to list 5% of the company, but only managed to sell 1.5% in its domestic markets - and it only accomplished that much because MbS resorted to a series of carrots and sticks to entice Saudi businessmen to invest. He even reportedly threatened to jail and torture Saudi businessmen like he had done during his infamous 2017 purge if they failed to kick in enough.

Since that deal fell apart, the company has sold bonds to international investors and even sold a stake in one of its pipelines to BlackRock.

agreed to sell a 49% stake in its natural-gas pipeline business to a consortium led by BlackRock.

Oil and gas prices have surged as Russia has cut supplies of natural gas to Europe amid a dust-up with the West over Ukraine.

Since being named heir apparent, MbS has been trying to diversify the Saudi economy so the kingdom doesn't become dangerously dependent on its fossil fuels business. WSJ added that many believe MbS is simply trying to sell shares and diversify before it's too late.

Some of the people close to the company said it is trying to cash in while investors still have an appetite for oil-related assets in a rapidly decarbonizing world. Distaste toward oil assets is growing as more investors factor in environmental criteria that determine how they allocate their funds. Aramco is the world’s fourth most-profitable public company after Apple Inc., Google parent Alphabet Inc. and Microsoft Corp.

The bigger question: while MbS has been able to strong-arm domestic investors in the past, $50 billion is a big number at a time when renewables are all the rage. Are there enough potential buyers to justify all those shares?