Bin Salman's $2 Trillion Saudi Aramco IPO Vow Still Unrealistic - Bloomberg

Bin Salman's $2 Trillion Saudi Aramco IPO Vow Still Unrealistic - Bloomberg:

Friday’s news that Saudi Arabia’s crown prince vows a $2 trillion IPO of Saudi Aramco within a few years may provoke a sense of déjà vu. It’s essentially the same headline that flashed around the world in early 2016, when he first raised the idea. Back then, it provoked a reaction of “Wow! Really?” Now it’s more “Huh. Really?”

Prince Mohammed Bin Salman reaffirmed plans for the biggest-ever IPO, and talked about much else besides, in a Bloomberg News interview late last week. Might it actually happen in “late 2020, early 2021,” as he now says? Maybe, but we’ve gone through a few deadlines already for the debut of Saudi Arabian Oil Co. (to give it its full name).

The prince’s rationale for this delay — that Aramco must first acquire the state’s majority stake in petrochemicals producer Saudi Basic Industries Corp. — seems contrived. Aramco’s valuation is tied overwhelmingly to the value of its upstream business. There is some industrial logic to combining this with Sabic’s downstream operations, though consolidating the country’s industrial assets even further under Aramco runs counter to the prince’s objective of making the economy more competitive. But Sabic’s market capitalization of $100 billion is just 5 percent of the $2 trillion valuation the prince still assigns to Aramco. Even assuming wildly valuable synergies, the idea that absorbing Sabic is critical to the oil giant’s IPO isn’t credible.