Daily Management Review

Kuwait & Abu Dhabi To Invest In Saudi Aramco IPO


Aramco IPO did not gather momentum beyond the Gulf region, resulting in a revised lower IPO target; Kuwait and Abu Dhabi are reported to provide support.

Source: commons.wikimedia.org; (public domain)
Source: commons.wikimedia.org; (public domain)
In an attempt to help Riyadh out of the strife of raising “$25.6 billion from a domestic listing of the state oil giant”, the wealthy neighbours of Saudi Arabia are planning to put in their money for Saudi Aramco’s initial public offering, in short IPO.
Aramco had to struggle to get “an anchor investor” for its listing while the interest remained limited to the Gulf region, whereby leaving Riyadh with no option but to scale down its IPO ambitions. However, even if manages to raise over “$25 billion”, it will still the biggest in the world.
Riyadh has decided to not hold roadshows beyond the Gulf, following which Aramco reached out to two oil producing neighbours, Kuwait and Abu Dhabi, for investing in the company, as both the countries hold “close ties to Saudi Arabia” and possess “big sovereign funds”. As per sources, the ADIA, or the “Abu Dhabi Investment Authority” considers making a minimum investment of “$1 billion”, although final amount still has to be sanctioned by the board.
Similarly, KIA or the “Kuwait Investment Authority” is also likely to join in the IPO invest, while the amount is yet to be seen as nothing seems clear as of now. Aramco as well as ADIA were not willing to comment on the matter while KIA did not give any immediate respond.
Saudi Arabia’s aim is to sell of Aramco’s “1.5% stake”, which would bring the value of the company at “$1.6 trillion to $1.7 trillion”, which appears to be a “lower valuation” in comparison to the initial aim of Crown Prince Mohammed bin Salman at “$2 trillion”. Jason Tuvey is Capital Economics’ Senior Emerging Markets, who considers the investment of any Gulf countries into Aramco IPO to be “purely a political decision rather than anything (else)”.
For Kuwait and Abu Dhabi to show their commitments they need to support “MbS and his plans to diversify the Saudi economy”. According to Reuters:
“Two sources said ADIA was considering investing at least $1 billion. Two others gave a range of $1.5 billion to $2 billion”.