Back to news

Analysis: An IPO in name only

By Paul Mackintosh  
Sep 11, 2019

I can confidently predict a couple of things that will not happen in Saudi Arabia around the listing of state-owned oil company Aramco. There will not be a great leap forward in shareholder rights. There will not be credible espousal of the principles of transparency and accountability in the public markets.

So you may well ask, without at least the germs of such things, or even a move towards them, what point is there in having any kind of initial public offering at all? Who would want a slice of it?

Yes, it’s very big. Very fat. Somewhere between US$1.5 trillion and $2 trillion, depending on the final valuation, even if only a small tranche of that will be floated initially. And lo and behold, Saudi Arabia is reportedly trying to drive up the price of oil, the world’s most politically sensitive commodity, to achieve its valuation objectives.

Khalid al-Falih, the well-respected energy minister who was also chairman of Aramco, has been sacked from those positions, apparently over lacklustre enthusiasm for the float. That’s how macroeconomically beneficent this planned listing is.

Oh, and what public offering? Are the world’s mom-and-pop investors queuing up for their share of Aramco? Can there be public ownership where the whole state is effectively the property of one family? Will the Saudi Arabian courts rigorously pursue and punish Aramco for any misstatement of its quarterly earnings? Will the cold-eyed hawks of the Saudi Stock Exchange pounce on its slightest indiscretion? Will brave whistle-blowing journalists expose insider dealing and other irregularities at Aramco?

Let’s see how that plays out where the owner of the listed entity also literally owns the judiciary and the stock exchange. It makes China’s Communist Party’s contortions over the private sector look positively adroit in comparison.

Aramco may be set to be the world’s biggest IPO. It’s also set to be the gravest subversion of the very idea of public listing. Bankers and financial players who tell themselves that the Saudi monarchy should be left to do what it pleases, and that the rights and opinions of its subjects don’t count in the balance against all that wealth, ought to remember 9/11 and who brought that off.

Obscene amounts of money may be a problem in many parts of the world, but their use for purposes like the war in the Yemen or the murder of journalists is something the world should be a lot more wary of. The more Saudi Arabia’s money involves and implicates others in its issues, the worse for everyone.