US Financiers Unwilling to Invest in Aramco IPO

Saudi Arabia’s willingness to delay the initial public offering of state oil company Aramco to 2019 has several motivations, from regulatory risk to competing projects in the government’s crowded agenda.

There is another, perhaps more significant hurdle: Some American investors are not interested, Bloomberg reported.

Over the past few weeks, Aramco executives and government officials pitched their plan for what could be the world’s largest share sale to some of the largest US mutual fund firms and hedge funds, according to people familiar with the discussions.

At the informal dinners and meetings in New York, Houston and Washington, investors pushed back at several aspects of the deal, the people said, asking not to be identified discussing private meetings.

Among the issues raised were the $2 trillion valuation Saudi Arabia wants for the world’s largest oil producer, the scale of dividends Aramco is prepared to pay and the impact of the shale boom on oil prices over the next few years.

Aramco said in a statement it would not "confirm or deny whether such meetings took place". The company added that its policy is not to provide running commentary on the course of IPO.

Saudi Crown Prince Mohammed bin Salman, who has made the IPO a key part of his ambitions to ready the economy for the post-oil age, is preparing to visit the US for a trip that will include a White House meeting with US President Donald Trump on March 20.

Trump has said that he is keen for the listing to come to New York, which is vying with London and Hong Kong to win the international portion of the share sale.

Even with a market value of $1 trillion, it would comfortably be the planet’s most valuable company ahead of tech giants Apple Inc., Alphabet Inc. and Amazon.com Inc.

During a visit to London last week, Saudi officials signaled a possible delay in the IPO to 2019 from an original target of 2018.

Saudi Oil Minister Khalid Al-Falih became the first senior official to publicly acknowledge the possibility, describing the deadline for the second half of 2018 as “artificial.”

Senior officials said privately they remain committed to achieving the crown prince’s valuation of at least $2 trillion based on Aramco’s access to the kingdom’s 261 billion barrels of oil reserves.

Riyadh is planning to sell about 5% of the company, potentially raising $100 billion and dwarfing the $25 billion banked by Chinese Internet retailer Alibaba Group Holding Ltd. in 2014, currently the world’s largest ever IPO.

Saudi officials hope American investors will buy a large chunk of the shares, irrespective of whether the company lists in London, New York or Hong Kong.