By Parag Deulgaonkar
Success of float will determine economic, political trajectory of Kingdom, says BMI Research
A failed float of Saudi Aramco is likely to put a halt to the current reform drive and weaken position of liberal forces in the country, a new report has warned.
In a TV interview, Deputy Crown Prince Mohammed bin Salman said on Tuesday that Aramco holds a concession to pump the kingdom’s oil and gas, and a stake in that business is what the government will sell in an offering of “not far from 5 percent” of company shares in 2018.
Bloomberg quoted analysts at Sanford C Bernstein & Co and Rystad Energy AS in March as saying the initial public offering (IPO) has a potential market value of more than $1 trillion.
BMI Research, a Fitch Group company, in a report titled “Saudi Aramco IPO could be game-changer in economic reform drive”, on Thursday, said there is plenty of scepticism among the investment community that the deal will not prove to be quite so lucrative.
“And if that does prove to be the case, then we believe that a failed float would likely put a halt to the current reform drive and weaken the position of liberal forces in the Kingdom more broadly.”
The consultancy added a lot hangs on the proposed floatation which could not only raise the Kingdom a significant amount of money, but it serves as a “very public litmus tests over overseas investor confidence in Saudi Arabia”.
“The success of the IPO will be crucial in determining the economic and political trajectory of the kingdom over the coming decade. As a central tenet of Vision 2030, a successful public market listing would boost investor confidence; increase transparency in the equities arena; and fast-track the diversification process of the economy, while simultaneously bolstering Mohammed bin Salman’s political capital.”