By Canadian Press

Report: Saudi Aramco shares to start trading in December

Oct 31, 2019 | 1:10 AM

RIYADH, Saudi Arabia — A long-delayed initial public offering of the state-run oil giant Saudi Aramco will see its shares traded on Riyadh’s stock exchange in December, a Saudi-owned satellite news channel reported Tuesday as the kingdom’s showcase investment forum began.

The report by Dubai-based Al-Arabiya enlivened the start of the Future Investment Initiative, a summit of panels and talks convened by the kingdom’s powerful Crown Prince Mohammed bin Salman that aims to showcase Saudi Arabia’s potential for investors.

However, some major firms stayed away and attendees at times hid their nametags behind their suit jackets, a sign of the shadow still cast over the event by the assassination last year of Washington Post columnist Jamal Khashoggi at the Saudi Consulate in Istanbul. Authorities also barred foreign journalists, including those from The Associated Press, from photographing or filming panels and speeches themselves despite having been invited to the event. They did not give a reason for the ban.

Prince Mohammed hopes for a very-optimistic $2 trillion valuation for Aramco, which produces 10 million barrels of crude oil a day and provides some 10% of global demand. That would raise $100 billion he needs for his ambitious redevelopment plans for a Saudi Arabia hoping for new jobs, as unemployment stands at over 10%.

However, economic worries, the trade war between China and the U.S. and increased crude oil production by the U.S. has depressed energy prices. A Sept. 14 attack on the heart of Aramco already spooked some investors, with one ratings company already downgrading the oil giant.

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The initial report by Al-Arabiya did not elaborate and cited anonymous sources for the information. However, the channel often breaks news before even the kingdom’s state-run media and is widely believed to have a direct line to the Al Saud royal family.

The station’s English arm later offered more details, saying that a final price for the stock will be set Dec. 4, with shares then beginning to be traded on the Riyadh-based Tadawul stock market on Dec. 11. It added that the Saudi Capital Markets Authority will make a formal announcement about the IPO plans on Sunday. Pricing will begin Nov. 17, it said.

“The Aramco IPO is a cornerstone of Saudi Arabia’s Vision 2030 plan, which aims to wean the kingdom off its reliance on oil to diversify the economy,” the channel said in its report.

Saudi state media and government officials did not immediately acknowledge the report. Saudi Aramco said it “does not comment on rumour or speculation,” but did not dispute the report. Analysts cautioned that the kingdom has blown through several planned dates already after Prince Mohammed first announced his intention to offer shares of Aramco in 2016.

There also have been decisions seemingly forced onto Aramco recently, including the nearly $70 billion purchase in March of the petrochemical firm Saudi Basic Industries Corp. just before it announced a plunge in its quarterly profits. That has seen a change in the long-standing perception that a “strong Saudi Aramco is a strong Saudi Arabia” to viewing the company as a “great source of capital,” said Ellen R. Wald, an Aramco expert who wrote the recent book on the firm called “Saudi, Inc.”

The kingdom has in the past used the company as a piggy bank for development companies, back when it was still an American company. Since buying a 100% interest in the firm by 1980, the royal family as its sole “shareholder” largely hasn’t interfered in the company’s long-term business decisions as its revenue provides around 60% of all government revenue.

“It’s a trend that I see is disturbing,” Wald told the AP. “It could be potentially damaging to the company, and then in the long term, damaging to the source of funding that has made Saudi Arabia so strong.”

Despite that, Wald said the IPO could prove positive for Aramco in the long term. She anticipated the firm offering as much as 3% of its worth on the Tadawul, with hopes a lot of interest in it would drive up its valuation ahead of a possible foreign listing. However, any dip in values likewise could pose a challenge in taking the shares abroad. As much as 5% of the company is likely to be offered publicly between the two markets.

Indian Prime Minister Narendra Modi and Jordan’s King Abdullah II both attended the summit’s opening Tuesday. Also attending was Jared Kushner, U.S. President Donald Trump’s son-in-law and a White House adviser.

The event is held in part at Riyadh’s Ritz-Carlton Hotel, which served as a detention facility during Prince Mohammed’s 2017 purge targeting businessmen, princes and others. Described at the time as an anti-corruption campaign, the arrests targeted wealthy potential challengers to the prince and cemented his grip on power amid allegations of torture denied by the kingdom. Authorities later said it saw the government recoup over $100 billion.

There were also big names in global finance who didn’t take part. Among them was Jeff Bezos, the CEO of Amazon and the owner of the Washington Post, who had been in negotiations to open data centres in the kingdom before the killing and dismemberment of Khashoggi.

U.S. officials and a recent United Nations special rapporteur’s report suspect Prince Mohammed had a role in the slaying, as members of the team of assassins sent to kill Khashoggi had links to the prince. The kingdom denies that.

As the forum started, panelists like Ray Dalio, the founder of the world’s largest hedge fund Bridgewater Associates, offered stark warnings about the state of the global economy, rising inequality and “a conflict between capitalism and socialism.” He compared times now to those in the Great Depression of the 1930s.

“There’s a form of revolution taking place,” Dalio said.

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Associated Press writer Malak Harb in Riyadh, Saudi Arabia, contributed to this report.

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Follow Jon Gambrell on Twitter at www.twitter.com/jongambrellAP .

Jon Gambrell, The Associated Press