The proposal to sell shares in Saudi Aramco, the world’s biggest oil company, stunned the financial markets last year. Muhammad bin Salman, now Saudi Arabia’s crown prince, promised that it would be the biggest initial public offering (IPO) of all time, valuing Aramco at $2trn.
It was to be the centrepiece of his plan to transform the Saudi economy, reducing its dependence on oil. It was meant to foster financial transparency and accountability in one of the world’s most hermetic kingdoms. Above all, it would cement the young prince’s image as a bold moderniser soon to inherit the throne.
Alas, youthful impatience appears to have got the better of him. His tendency to micromanage the IPO and vacillate over where Aramco should be listed has caused delay and confusion. Matters came to a head this week when advisers, speaking anonymously, and company executives doing the same, gave conflicting reports, suggesting a mutinous atmosphere.
The kingdom’s advisers say privately that the decision to list in New York or London has been postponed, and that the plan “for now” is to issue shares on Riyadh’s puny Tadawul exchange, with a private placement possibly to Chinese investors. But Khalid al-Falih, the oil minister and Aramco’s chairman, insisted the IPO would go ahead at home and abroad next year as originally planned. Company officials scorn the idea of listing only on the Tadawul, which would be swamped by an Aramco IPO.
The confusion appears to have originated from the royal palace. From the outset, MBS, as the crown prince is known, has insisted that the firm should be valued at no less than $2trn, and that the IPO should happen next year. He had not fully appreciated either the threat of lawsuits related to the terrorist attacks of September 11th 2001 that could result from listing on the New York Stock Exchange, or the complexities of issuing shares on the London Stock Exchange, where institutional investors are angry about efforts to water down listing rules for Aramco. He wrongly assumed that, given the huge fees promised to bankers and advisers, other actors in the world of finance would bend the knee.Moody blues: Hartford is likely to default on its debt by November and, if it doesn’t change course, will run up annual deficits exceeding $60 million through the next 20 years; bondholders may recover as little as 65 percent of their investment.
Mega blues: GE cuts 2017 profit forecast; shares tumble. Shares of GE now on sale: falling below $22. The two-year chart looks awful, if placed side-by-side with the overall market during the same period.
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Volatility: world's biggest oil traders all over the map when it comes to forecasting oil prices.
OPEC: strongest signals yet it will extend cuts to December 31, 2018.
Schlumberger shares struggling.
Oilfield services giant Schlumberger Ltd sealed a deal to buy oil and gas assets worth $1 billion from Cenovus Energy on Thursday, raising further concerns about its strategy to own more refining and drilling operations directly.
For Calgary, Alberta-based Cenovus, the sale is the latest in its plan to offload assets as it pays down debt, including loans it took up to fund its $13.3 billion purchase of oil sands and natural gas assets from ConocoPhillips.
Cenovus's shares were up about 2 percent in afternoon trading, while Schlumberger's were down about 1.5 percent, along with other energy stocks due to lower crude oil prices.Schlumberger: sees oil prices rising.
Futures: Dow up "almost triple digits."