Saudi Arabia replaces Aramco chairman ahead of potential IPO

Initial Public Offerings (IPOs) are relatively common in the Middle East but not all are successful. This is often because the stock exchanges are thin.

Saudi Aramco's potential IPO is set to be the biggest in the region, hoping to raise USD100 billion based on a USD 2 trillion valuation.

Given the importance of this IPO it's hardly surprising that the head of Saudi Aramco, a Saudi Arabian, has been replaced. But the verdict is out as to whether it will make any difference.

Explaining the change at the helm and what this might mean is the article by AFP below.

Riyadh: Saudi Arabia on Monday named the head of its sovereign wealth fund as chairman of oil giant Aramco, replacing Energy Minister Khalid al-Falih as the state-owned company prepares for a much-anticipated initial public offering (IPO).

"I congratulate... Yasir al-Rumayyan, governor of the Public Investment Fund, on his appointment as chairman of the board of directors of Saudi Aramco, which is an important step to prepare the company for the public offering," Falih said on Twitter.

Rumayyan, already an Aramco board member, is the head of the vast Saudi sovereign wealth fund that is spearheading an ambitious plan to diversify the kingdom's oil-reliant economy.

The news comes after Falih, who has long headed both Aramco and the energy ministry, has seen his portfolio shrink as the kingdom reels from low oil prices.

Saudi Arabia on Friday announced the creation of a new ministry of industry and mineral resources, separating it from the energy ministry as it steps up efforts to boost non-oil revenue.

"All this shows that in Saudi Arabia there has been some dissatisfaction at the highest levels on how things have been going," Olivier Jakob, from the consultancy Petromatrix, told Bloomberg News. "Falih has not really fully delivered on oil prices. There's speculation that prices and the IPO are linked and they need higher prices to get the valuation they want for the IPO."

Aramco has said it plans to float around five per cent of the state-owned company in 2020 or 2021, in what could potentially be the world's biggest stock sale.

It aims to raise up to $100 billion based on a $2 trillion valuation of the company, but amid low oil prices investors have debated whether Aramco is really worth that much.

Failure to reach a $2 trillion valuation as desired by Saudi rulers is widely considered the reason the IPO, earlier scheduled for 2018, has been delayed.
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Tuesday, 03 August 2021