Saudi Aramco investors forced to 'stay patient’ as IPO is reportedly delayed

  • Saudi Arabia's state-owned oil behemoth had planned to begin trading on the country's domestic stock market — the Tadawul — and one or more foreign exchanges in the second half of 2018.
  • However, Aramco's listing is now no longer expected to take place this year, according to a Financial Times report citing British officials briefed on the matter.
  • Indecision at the highest levels of Saudi Arabia's government is thought to have stoked frustration among company executives.
Saudi Arabia' oil minister and chairman of Saudi Aramco Khalid A. Al-Falih arrives as Crown Prince Mohammad bin Salman meets Britain's Prime Minister Theresa May in Downing Street in London, March 7, 2018.
REUTERS | Simon Dawson
Saudi Arabia' oil minister and chairman of Saudi Aramco Khalid A. Al-Falih arrives as Crown Prince Mohammad bin Salman meets Britain's Prime Minister Theresa May in Downing Street in London, March 7, 2018.

Investors hoping to a buy a piece of the world's largest oil company may be forced to wait until 2019 at the earliest, amid reports Saudi Aramco's initial public offering (IPO) is likely to be delayed.

Saudi Arabia's state-owned oil behemoth had planned to begin trading on the country's domestic stock market — the Tadawul — and one or more foreign exchanges in the second half of 2018. However, Aramco's listing is now no longer expected to take place this year, according to a Financial Times report citing British officials briefed on the matter.

"I'm guessing investors are going to be a bit disappointed but they have no choice other than to stay patient and jump on the bandwagon when it finally happens," Tamas Varga, analyst at PVM Oil Associates, told CNBC in a phone interview Monday.

Original valuation 'may be on the high side'

The Financial Times report suggested Aramco's IPO — widely seen as the cornerstone project of the kingdom's efforts to reform its economy — is struggling to arrive at the $2 trillion valuation sought by Saudi's crown prince, Mohammed bin Salman.

In an interview with Bloomberg last week, Saudi Arabia's Energy Minister Khalid al-Falih said that while Aramco's offering could conceivably take place in 2019, the timeline would not be especially relevant.

"Between December 31 and January 1, there is no value lost for the kingdom," al-Falih said, before adding: "So I don't understand this artificial deadline you refer to as being significant."

London, New York and Hong Kong are among the foreign bourses competing for the share sale. Saudi's Bin Salman is believed to favor listing in New York, while officials, including Energy Minister Khalid al-Falih, reportedly favor London.

A domestic listing and a private sale to a strategic investor — possibly from Beijing — is another possibility.

"Maybe they are starting to realize their original $2 trillion valuation may be on the high side and so have decided to postpone," Varga said.

Debate seems 'alive and well'

Indecision at the highest levels of Saudi Arabia's government is thought to have stoked frustration among company executives. This discontent comes at a time when deadlines for the listing have frequently been pushed back and eleventh-hour privatization options have also emerged.

Meanwhile, the prospect of a delayed IPO would also represent a significant setback for a central plank of Riyadh's plans to modernize its economy.

Simon Dawson | Bloomberg | Getty Images

Saudi Aramco, currently a private company owned by the kingdom's government, is aiming for an IPO that could raise about $100 billion and attract a valuation in the range of $1 trillion to $2 trillion.

Last month, BP CEO Bob Dudley told CNBC that he expected "little market dislocations" would be to blame for any looming disruptions to Saudi Aramco's plans to list. "The big questions are if they do, when? And where would they list? I think that debate seems to me to be alive and well," he added.