Saudi Aramco stock soars in debut amid skepticism
By: Thornton M.
Saudi Aramco’s stock is a gusher — but critics charge that it’s getting pumped by the Crown Prince.
The state-owned oil giant surpassed Apple to become the world’s most valuable company in its first minutes of trading on Wednesday, surging 10% to nab a valuation of $1.88 trillion on Saudi Arabia’s stock exchange.
Nevertheless, insiders noted that more than three-quarters of its shares were bought by either Saudi nationals, who were incentivized to buy the stock, or investors in neighboring Gulf states that are friendly with the royal family.
That may be why the success of the debut was eerily predicted by members of the royal family, who kicked off trading Wednesday by ringing a golden bell amid a laser-light show and showers of confetti.
“Those who have not subscribed in Aramco will be chewing their thumb to the point that I will be worried about them that they go and fix themselves in the hospital,” Saudi oil minister Prince Abdulaziz bin Salman said in an interview at an OPEC meeting in Vienna last week.
Crown Prince Mohammed bin Salman, who famously jailed wealthy political adversaries at the Ritz-Carlton in what he called a “corruption crackdown,” has promised Saudis who hold the stock will be rewarded with 100 free Aramco shares for every 10 they have by the middle of 2020 — a deal that has raised eyebrows on Wall Street.
“The whole thing is a shakedown” says one macro trader “MBS is saying “buy the IPO or stay at The Ritz.”
Squeamish about the Crown Prince’s methods of ginning up support for the shares, sources say America’s biggest banks were left little more than table scraps in the biggest IPO in history, whose $26.5 billion cash raised edged past the previous record holder: China-based internet giant Alibaba.
The process has been rocky ever since the Crown Prince proposed taking a portion of Aramco public in 2016 at a $2 trillion valuation — a number that critics say appeared to come out of thin air.
The original plan was for Aramco to list a 1.5% slice of itself on a foreign exchange and then list the rest on its domestic exchange, providing the kingdom with foreign liquidity but retaining almost total state control.
Twenty firms including JPMorgan, Goldman Sachs, Morgan Stanley and Citigroup jumped in to consult on the multitrillion-dollar listing, even though a US listing seemed doomed from the start.
“It’s a very bad idea for the Saudis to have their stock trading on the NYSE if the 9/11 families ever get their way,” said one global energy expert, referring to an active class-action lawsuit by families of 9/11 victims seeking restitution for their role in the attack. “Having that much floated on an American exchange would make it more possible to be seized in a lawsuit.”
As the oil market wobbled and the IPO market stumbled, bankers urged the Saudis to lower Aramco’s valuation but MBS stubbornly insisted on the $2 trillion valuation. Further crippling the process, Aramco’s management was reluctant to heed Wall Street’s advice to entice investors with a competitive dividend, sources said.
