Saudi Aramco IPO: The primary reasons behind it

Abstract

In January 2016, Prince Mohammad bin Salman surprised the world by announcing that the Saudi government intended to initiate the biggest initial public offering (IPO) inhistory. Saudi Aramco is the world’s largest oil producer. Riyadh delayed the transaction several times, although it was the centrepiece of Saudi Arabia’s Vision 2030 plan to diversify the kingdom’s economy which is highly reliant on oil. The aim of this paper is to analyse the political reasons for the Saudi Aramco’s IPO delay. The paper’s main assumption is that the Kingdom overestimated Western investors’ financial leverage, because in spite of their qualms more than 5 million investors set aside concerns over the company’s close ties to a state with a controversial human rights record, and the uncertainty over the global oil industry’s future. The paper will analyse the key factors, and major internal and external political conflicts which had an effect on the Saudi Aramco’s IPO. As a result, the paper will challenge the necessity of the IPO from an economic point of view, because the timing was the worst possible.