Trouble, is that you? Aramco speaks to investors on its IPO woes

Written by: Damian Wood
March 11, 2020
  • Saudi Aramco pitches Abu Dhabi investors on troubled IPO
  • Aramco has been reaching out to institutional investors both locally and internationally
  • However, many foreign investors have remained hesitant when it comes to investing in the Saudi oil giant

Saudi Aramco on Monday conducted a meeting with the Abu Dhabi Investment Authority (ADIA) officials to discuss the oil giant’s share sale deal. The United Arab Emirates (UAE) meeting between the company and the authority officials saw the two parties air the views on an investment deal that would potentially raise $25.6bn, sources familiar with the dealings told Reuters.

But even with fairly attractive numbers, Aramco has not been able to net an anchor or cornerstone investor for its IPO which could go down in history as the biggest listing ever. Other than ADIA, the oil company has also held talks with Singapore‘s sovereign wealth fund, GIC as well as the Kuwait Investment Authority (KIA).

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

The not-so-publicized meeting between Aramco’s and ADIA officials comes after the second leg of a Gulf marketing effort by Aramco and its advisers.

Another separate roadshow was held in Abu Dhabi on Sunday.

When contacted by Aljazeera for comment, both ADIA officials and those of Aramco declined to issue any statements on the matter.

“Aramco has stepped up a gear this month, but the signs are that it is unlikely to be the blockbuster sale that the Kingdom once hoped for,” the London-based Capital Economics said on Monday.

It added: “And plans for this sale to be followed by an international listing seem to have lost momentum”.

But sources also indicated that Aramco has also cancelled a series of roadshows as a result of what is believed to be low foreign institutional investors‘ interest. And some of the investors who attended the Sunday roadshow in Abu Dhabi also expressed their reservations about having a stake in the company.

One of the fund managers said that the state-owned oil company’s future weight in the region’s benchmark indices was a motivating factor for the Middle Easterners and North Africans to invest in the firm.

However, Aramco’s dividend yield of 4.4% is said to be less attractive compared to many oil trading companies, another fund manager said. Take for instance Royal Dutch Shell, which has a 6.48% dividend yield.

Aramco is looking to give away a stake of 1.5% in the company after settling on a valuation of between $1.6 and 1.7 trillion. The company has set a five-year base dividend of $75 billion.