Daily Management Review

Much Awaited Aramco IPO Blocked By Saudi King: Reports


Much Awaited Aramco IPO Blocked By Saudi King: Reports
The much awaited and talked about Initial Public Offering (IPO) of 5 per cent of the state owned largest oil company of Saudi Arabia – Saudi Aramco, has been shelved.
It has been two years since the idea of the largest ever IPO was floated by the Crown Prince of Saudi Arabia Mohammed bin Salman and there has immense interest among investors about it. However, the launch has been delayed on quite a few occasions. The Saudi authorities were hoping to amass about $100 billion from the deal and use it to invest in developing and diversifying the economy to reduce over reliance on petroleum.
The launch and the plan of the IPO of Aramco was reportedly shelved after intervention by King Salman of Saudi Arabia as reported by the Reuters news agency citing three sources with ties to government.
The decision was reportedly arrived at after meeting of the king with other members of the royal family, bankers, and senior oil executives. According to the sources, the meetings had been organized during Ramadan, which ended in the middle of June.
The kingdom would be undermined by the IPO and not helping it as had been claimed for long, the king was advised by his interlocutors. The report said that the biggest disadvantage of the IPO would be that it the finances of Aramco have to be checked by outsiders which would disclose the financial details of Aramco.
The sources also reportedly said that the  diwan, or administrative office of the king was ordered by the king himself to call of the IPO. Sources also said that the king's decision is final in the kingdom.
"Whenever he says 'no', there is no budging," the source said.
There were unconfirmed reports last week about the Aramco IPO being stalled resulting in a statement form the Saudi Energy Minister Khalid al-Falih claiming that the government would be definitely be conducting the IPO at an unspecified date in the future.
There was a repetition of that statement from Saudi sources again who this time reportedly claimed that the government is one of the shareholders of Aramco and it was preparations of IPO would be taken at the right conditions.
"Aramco's shareholder is the government of Saudi Arabia. His Majesty, King Salman, has delegated management of the IPO to His Royal Highness the Crown Prince, and a committee which includes the Ministers for Energy, Finance and Economy,” the source reportedly told Reuters news agency.
"Therefore, decisions around the nature and timing of the IPO, will be decided by the committee for the government's approval," the Saudi official said.
The shelving of the Aramco IPO is a big set back for the Vision 2030 plan of the crown prince.  The decision reflects that the unilateral powers of the crown price is being kept under check after the current king ascended to the throne in 2015.