By Anders Opitz
Money & Investing Writer
In the recent months bulge bracket investment banks have been lining up to get their spot on the Saudi Aramco IPO. Banks involved in the deal include JPMorgan Chase & Co, Morgan Stanley, Goldman Sachs, Bank of America Merrill Lynch, Citigroup, HSBC Holdings, Credit Suisse AG, and two domestic investment banks.
Crown Prince Mohammad bin Salman’s vision for his kingdom is vastly different than the current land scape and is expecting the IPO to bring in billions of dollars in order to transform the kingdom. His plan involves vast social and economic reforms to help the Kingdom become less dependent on oil when improving the standard of living. The logistics of the deal are still being ironed out, but it is expected that Aramco lists roughly 1 percent of itself before the end of the year. According to comments of Prince Mohammed, it is his hope that public participation in the world’s most profitable company will reach 5 percent. This would put Aramco’s valuation around $2 trillion, while most analyst estimates fall in the range of $1.5 trillion based on low oil prices and political conflict in the region.
All while this is occurring, there is plenty of conflict going on in the region that impact the price of oil. Oil being the fundamental factor in the valuation of Aramco means that there could be possible volatility in the valuation of the company.
This past Saturday it was announced that there was an attack carried out in the heart of the Kingdom that led to mass fires forcing half of Aramco’s capacity to be put offline. An Iran led Houthi rebel group took responsibility for the attack. The shutdown amounts to roughly 5 percent of the world’s daily crude production, which is a severe supply shock. Production is expected to get back on track quickly, but events just as this are huge risk factors to the IPO and Prince Mohammed’s vision for the kingdom.
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