Aramco Failure to Win Foreign Money Makes IPO Local Event
Comment of the Day

November 18 2019

Commentary by Eoin Treacy

Aramco Failure to Win Foreign Money Makes IPO Local Event

This article by Javier Blas for Bloomberg may be of interest to subscribers. Here is a section: 

Most of the money is likely to be raised from domestic rather than foreign investors. This means that the proceeds won’t be a fresh inflow of foreign capital but an internal transfer from Saudi households and corporates to the government. --Ziad Daoud, Chief Middle East Economist for Bloomberg Economics

So poor is the international appetite for the deal, even at the lower valuation, Saudi Aramco decided at the last minute against marketing the IPO in the U.S., Canada and Japan -- three markets traditionally seen as a must-go destination for any big Wall Street deal. Instead of the planned approach to American investors, using what lawyers and bankers know as the 144A rule of the U.S. Securities Act, Aramco decided on Sunday the tepid interest meant it wasn’t worth the trouble.

Eoin Treacy's view

Russian and Chinese assets always appear at the top of value screens when sorting for value on a global scale. However, that ignores the geopolitical risk of investing in those areas. The same might now also be true of the Saudi Aramco IPO. The attack on Saudi Aramco’s infrastructure served to highlight how exposed it is to damage from conflict and that alone was probably enough to compress the valuation and deter interest ahead of the IPO.

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