Since Saudi Aramco, the Saudi Arabian-owned oil titan, announced that it would be going public, there had been some speculation that foreign investors would shy away from the stock because of moral indignation over the country’s alleged human rights violations.
Heck, it even allegedly targeted a skeptical economist. From Liberty Nation:
“In a case related to the stock, economist Essam al-Zamil was believed to have been targeted by authorities over his skepticism of the IPO. The human rights watchdog said that Zamil “had called into question Saudi projections of revenue from the Aramco initial public offering.” He is currently on trial for his alleged membership in the Muslim Brotherhood.”
Yikes.
But if the state-owned company was concerned that there would be no foreign interest, then it can have its concerns kiboshed. According to Bloomberg News, China wants to purchase about $10 billion in the Aramco IPO.
From the business news organization:
The Beijing-based Silk Road Fund is among parties that have been in discussions to buy stock in the offering, according to the people, who asked not to be identified because the information is private. Some other Chinese funds or state-owned enterprises may also join, the people said.
President Xi Jinping has been seeking to increase China’s political clout and revive ancient trading routes under his “One Belt, One Road” initiative. An investment in Aramco would cement ties with Saudi Arabia as well as provide China a way to profit from rising oil prices.
State-owned oil producer Sinopec Group and sovereign wealth fund China Investment Corp. have also held talks in recent months about investing in the Aramco IPO, the people said. Commitments haven’t been finalized, and the lineup of investors and the amounts each firm puts in will ultimately depend on the Chinese government, the people said.
The Silk Road Fund was set up in 2014 with $40 billion of initial capital. It was later supplemented with another 100 billion yuan ($14 billion) of funds, according to its website.
Large commitments from China would help Aramco make the share sale a success after Western money managers pushed back earlier on the company’s valuation. Saudi Crown Prince Mohammed Bin Salman has long insisted the state oil company is worth $2 trillion, although he’s prepared to scale back his expectations to between $1.6 trillion and $1.8 trillion, Bloomberg News has reported.
So far, nobody has declared that they want to buy anything. Norway has confirmed that it does not intend to get a stake in the IPO. But that is about it.
There are many unknowns so far, such as the price target and planned dividend. But the real story is if investors will turn a blind eye to the kingdom’s iniquities.
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