Saudi Arabia has called off Aramco float, report suggests

Saudi Arabia is reported to have cancelled its plans to sell shares in state oil giant Aramco, which had been billed as the largest flotation ever.

The group of financial advisers working on a plan to sell 5% of the company domestically and internationally has been disbanded, Reuters reports.

The wire service quoted a source suggesting the decision was taken some time ago but is not being announced.

Neither Saudi Aramco nor the Saudi Royal Court has commented on the story.

Mohammed bin Salman, Saudi Arabia’s Crown Prince, first proposed the share sale early in 2016 as part of his economic reform agenda, to bring western regulation and scrutiny to the company, as well as raising cash to reduce the country’s large budget deficit.

At the time he predicted the sale would value Aramco at around $2 trillion (£1.55 tn). The plan was to float shares on both the local stock market in Riyadh, and one of the world’s leading international financial centres.

Big business

Saudi Aramco ranks as the world’s largest oil and gas business. Forbes Magazineestimates it generates $1bn a day in revenues. Its businesses cover management of the world’s biggest oil fields as well as extensive refining and chemicals operations.

With stakes this high, London, Hong Kong and New York competed fiercely to host the initial public offering (IPO).

Donald Trump tweeted last year: : «Would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange. Important to the United States!»

In London the Financial Conduct Authority changed its rules to make the listing easier, attracting criticism from MPs and from the Institute of Directors who said adapting regulations to accommodate Saudi Aramco could harm the UK’s reputation for good governance.

No decision had been taken on where to list the shares.

‘Delay and cancel’

Reuters said it had spoken to four senior industry sources about the plans being scrapped.

«The decision to call off the IPO was taken some time ago, but no-one can disclose this, so statements are gradually going that way — first delay then calling off,» Reuters quoted one as saying.

The wire service said financial advisers who had been working on the listing were now focusing on the proposed acquisition of a «strategic stake» in local petrochemicals maker Saudi Basic Industries, according to two of its sources.

In late 2017 rumours first emerged that the flotation might be cancelled, and it was suggested that Aramco shares might instead be sold privately to the world’s biggest sovereign wealth funds and institutional investors.

Meanwhile there have been suggestions that some members of the Saudi royal family are concerned that a listing in New York may entail legal risks, citing US terrorism legislation that would permit US citizens to sue Saudi Arabia.

Some observers have also criticised the $2tn predicted valuation for Aramco as unrealistic, which may have made it difficult to proceed with the flotation.

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