Saudi Arabia’s Crown Prince Mohammed bin Salman is embarking on a multi-city tour of the U.S. this week as the highly anticipated Aramco IPO faces listing obstacles.
Initially expected this year, the IPO could be pushed back into 2019, The New York Times reported last week. The state-owned oil company did not comment on the timing.
Among the considerations Saudi Arabia is facing is where to list. While President Donald Trump has publicly advocated for the crown prince to list Aramco on a U.S. exchange, such as the New York Stock Exchange (NYSE), experts have told FOX Business that New York may not be the best choice for Saudi Arabia because of litigation concerns arising from U.S. legislation that allows family members of 9-11 victims to sue the Saudis.
Additionally, global index compiler MSCI is considering upgrading Saudi Arabia to emerging-market status, a decision it has said will be made by June. The upgrade could attract an influx of cash from foreign investors, though the classification would not take effect until 2019.
Oil prices also remain a concern. As Saudi Arabia seeks to diversify its economy by reducing its reliance on oil revenue, it will transfer 5% of state-owned Saudi Aramco to its Public Investment Fund (PIF) through the initial public offering, expected to be the largest in history. The country has been pressed by falling oil prices, which plummeted in 2014, and have recently hovered in the range of $50 to $65 per barrel. Higher oil prices would boost the valuation of the Aramco IPO, which leaders are hoping will attract $2 trillion. The kingdom is expecting to raise $100 billion to invest in companies around the world.
The Aramco IPO is part of a comprehensive plan, known as Vision 2030, laid out in April 2017 by the country’s leaders. The IPO, however, has been delayed on multiple occasions as obstacles keep cropping up. At a time when the future value of the underground oil market is less certain, experts have expressed skepticism that the Saudis will be able to raise $100 billion and diversify away from oil under the “unusually ambitious” 2030 timeline.
In October, Saudi Arabia held a summit aimed at arousing the interest of foreign investors in its Public Investment Fund. Among the business leaders who attended the summit were venture capitalist Peter Thiel, Dow Chemical CEO Andrew Liveris, BlackRock CEO Larry Fink and SoftBank CEO Masayoshi Son.
The PIF invested $3.5 billion in ride-sharing company Uber last year, while Saudi investment in U.S. bonds reached a one-year high of $114.4 billion at the end of March, up noticeably from a low in September of $89.4 billion. Trump visited the kingdom in May, when he announced a $110 billion arms sale to the country.
The crown prince is expected to meet with Trump in Washington, D.C., on Tuesday.