Saudi Aramco is one of the world’s biggest money-making company, and J.P. Morgan Chase is about to take the lead advisory role for its Initial Public Offering (IPO). Although it’s not yet written in stone, everybody anticipates the final decision by the following week, according to reliable sources.
It was Morgan Stanley that has been going head-to-head against J.P. Morgan Chase for the indenture, sources say. But with the flops they did when they pursued the IPO of ride-sharing titan, Uber at the same time, chances are, they might get disappointed with this deal.
Saudi officials are unhappy about the move Morgan Stanley made on Uber’s stock last May 2019. These officials are huge holders of the stock, as they acquired it through the country’s sovereign wealth fund. Unfortunately, it plunged 18% on the first two trading days, and the IPO price is still less than $45.
Through the years, investment banks throughout the world have been enticing the Kingdom of Saudi. Saudi Aramco is the world’s biggest oil company, and one of the country’s biggest moneymaker. It produced a profit of $ 111.1 billion (more than double what Apple made) last year. The plan to diversify their Estate’s investments away from fossil fuel is the reason why Crown Prince Mohammad bin Salman (also known as MBS) offered their state-owned IPO.
When it comes to IPOs, these are the investment banks that always go head-to-head: Morgan Stanley, Goldman Sachs, and of course, J.P. Morgan Chase. So far, this year will be extra-sweet for J.P. Morgan Chase CEO, Jamie Dimon, as his bank is very close to getting that deal.
Last year, MBS delayed an IPO when Saudi Aramco went for the take-over of a $69 Billion Saudi chemical producer. The Saudi officials wanted to make $100 billion by selling a 5% stake in Saudi Aramco. They valued the company at two trillion ($2 Trillion) dollars. They wanted to surpass the $25 Billion that Chinese e-commerce company, Alibaba, raised during its IPO in 2014. To note, this is the second time that Saudi officials have offered an IPO.
According to sources, MBS wants to push ahead with a listing as early as November this year. Earlier reports say that they wanted to list by next year (2020) or the following year (2021). Their initial plan was first to get listed on the local Saudi exchange this year. They are looking at $25 billion worth of shares. They also plan to sell that stock in New York, or London by next year.
But why are they in such a rush? The reason: they are concerned that at some point, the stock markets may not be open to an enormous offering by next year. This IPO gap may close as markets may decline and, a slowdown in global economies may also take hold.
Sources also say that Saudi officials, with their bankers, will make their final resolve on whether they’re pushing on with the IPO. By October this year, they can come up with a valuation they are seeking.
So what else could stop this arrangement from happening? Many sources claim that a sudden market crash or if the price of oil goes in disarray, this could thwart the deal. There have been speculations that the stock market may crash this year, but all of it is just speculation. Furthermore, the issue of the assassination of Jamal Khashoggi has already cooled down, so I guess we’ll have to expect good things to happen, starting this October.