Samantha Gross, Fellow at Brooking institute, explains why Saudi Aramco’s IPO did not get listed internationally as initially planned but was instead listed locally in Riyadh.
• Gross believes Saudi Arabia were reluctant to expose the inner workings of the largest oil company in the world. An international IPO would bring increased scrutiny of the operations and bring the company under direct control of foreign regulators.
• She argues that the valuation proposed internationally, $1.1 to $1.5 trillion, was lower than the Saudi Arabia had anticipated.
• Finally, Prince Mohammed would like to retain control over the IPO and the outcome.
Why does this matter? The limited success of Saudi Aramco’s IPO could be bundled into the same category as other recent IPO flops like WeWork. However, the geopolitical angle is important. Saudi Aramco will now raise about $25 billion vs the $100 billion targeted in 2016. This complicates the country’s efforts to diversify the economy as per the Vision 2030 project.
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