Almost two years have passed since the Saudi crown prince Muhammad bin Salman intimated that Aramco was considering an initial public offering (IPO).
Since then, some more details have crystallised, including that 5 per cent of the company is up for sale, and that the IPO is a firm plan rather than an abstract possibility. Yet the IPO remains mostly mysterious, with most media reports being based on anonymous sources from within the oil behemoth, or unnamed hedge fund managers. Why is it so hard to get transparent analysis? Several factors are at play.
First, much of the background information that would usually be available in the build-up to an IPO, such as objective assessments of the company’s assets, are unavailable due to Aramco’s importance to Saudi Arabia’s national security, in an era where the kingdom faces a multitude of geo-political threats. In contrast, when a company such as the cloud storage major Dropbox considers an IPO, there are no national security concerns that retard the flow of relevant information to prospective investors.
Moreover, while oil is a very mature market, it is remains a fundamentally volatile one, meaning that even the accurate, publicly available information is difficult to analyse. This is partially due to the unpredictable nature of technological progress in the industry itself: there is a lot of uncertainty concerning shale oil, and regarding the efficiency of competing forms of renewable energy. This is reinforced by the presence of significant policy-related uncertainty: will governments ban petrol cars? Will Opec maintain discipline? Will major oil producers suffer supply disruptions caused by violent conflict? In contrast, music-streaming service Spotify operates in a sector largely free from geo-political and technological drama, affording investors much more confidence about the future trajectory of profits.
In addition to these two factors, there is the issue of purposeful misinformation by stakeholders vying for a strategic advantage. While nobody knows the precise value of Aramco - in fact a primary function of an IPO is to provide an objective estimate of the value - we can be confident that it is in the hundreds of billions of dollars, and possibly trillions, meaning that a 5 per cent share issue is big money.
Global financial markets are fiercely competitive, meaning that both buyers and sellers are constantly looking for even the smallest edge. In an IPO that is worth billions of dollars, nudging the needle in your favour can result in a huge windfall, amplifying the incentive to ensure that you get the best deal possible.
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Read more:
Crown prince Mohammed reiterates 2018 Aramco IPO timing
Saudi’s Tadawul is raising the stakes as it prepares for Aramco IPO
Aramco chief says lack of investment may hit oil supplies
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A key tool in the trader’s toolbox is misinformation. Prospective buyers will feign apathy, and project false doubts in an attempt to dissuade other, competing buyers from purchasing shares, helping to push the price down. Conversely, sellers have an incentive to circulate stories of having second thoughts because they are receiving extremely high direct offers, or because the company doesn’t really need the capital, as this helps push the price up.
This sort of posturing is completely analogous to what you experience in a local souq as you haggle over a decorative rug or a piece of jewellery: you, the buyer, pretend as if you have lots of alternative options, and that you barely even like the goods; while the seller will try hard to convince you that such quality is unavailable at a better price, and that meeting your proposed offer will render the trade unprofitable to them.
At present, other prospective IPO companies, such as Snapchat and Uber, would love to operate in a similar fashion. However, their hands are tied, relatively speaking, because they are operating in markets that are far more transparent and stable than oil. In contrast, stakeholders in the Aramco IPO have much more to work with because of the background uncertainty, the national security concerns and Saudi Arabia’s track record of secretive decision-making on many important policy issues.
Beyond the strategic misinformation emanating from those who perceive a benefit from the IPO, there are also those who oppose it and therefore wish to derail it for their own interests. Recall that a primary reason for the IPO is raising capital for the Vision 2030, a key step in securing Saudi Arabia’s economic future; consequently, the kingdom’s geopolitical rivals are likely to exploit any opportunity to impede the IPO’s progress. Moreover, there is the possibility of opposition from inside Saudi Arabia, too, since the IPO’s other primary goal is the improvement of corporate governance - a process that always creates individual losers, even if the organisation as a whole benefits. This is analogous to the disgruntlement expressed by civil servants when policymakers - including Saudi Arabia’s - announce plans to decrease government red tape.
Expect plenty more “hot air” and jockeying from investors during the next few months. The sensible course of action is to ignore most of it, and to focus on Aramco’s share price at the IPO and in subsequent trading: there is no better measure of value than what people are actually willing to pay for something, rather than what they claim they will pay.
Omar Al-Ubaydli is a researcher at Derasat, Bahrain. We welcome economics questions from our readers via email (omar@omar.ec) or tweet (@omareconomics).
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
STAY%2C%20DAUGHTER
%3Cp%3E%3Cstrong%3EAuthor%3A%20%3C%2Fstrong%3EYasmin%20Azad%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EPublisher%3A%20%3C%2Fstrong%3ESwift%20Press%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EAvailable%3A%20%3C%2Fstrong%3ENow%3C%2Fp%3E%0A
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
The specS: 2018 Toyota Camry
Price: base / as tested: Dh91,000 / Dh114,000
Engine: 3.5-litre V6
Gearbox: Eight-speed automatic
Power: 298hp @ 6,600rpm
Torque: 356Nm @ 4,700rpm
Fuel economy, combined: 7.0L / 100km
Dr Afridi's warning signs of digital addiction
Spending an excessive amount of time on the phone.
Neglecting personal, social, or academic responsibilities.
Losing interest in other activities or hobbies that were once enjoyed.
Having withdrawal symptoms like feeling anxious, restless, or upset when the technology is not available.
Experiencing sleep disturbances or changes in sleep patterns.
What are the guidelines?
Under 18 months: Avoid screen time altogether, except for video chatting with family.
Aged 18-24 months: If screens are introduced, it should be high-quality content watched with a caregiver to help the child understand what they are seeing.
Aged 2-5 years: Limit to one-hour per day of high-quality programming, with co-viewing whenever possible.
Aged 6-12 years: Set consistent limits on screen time to ensure it does not interfere with sleep, physical activity, or social interactions.
Teenagers: Encourage a balanced approach – screens should not replace sleep, exercise, or face-to-face socialisation.
Source: American Paediatric Association
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
Other acts on the Jazz Garden bill
Sharrie Williams
The American singer is hugely respected in blues circles due to her passionate vocals and songwriting. Born and raised in Michigan, Williams began recording and touring as a teenage gospel singer. Her career took off with the blues band The Wiseguys. Such was the acclaim of their live shows that they toured throughout Europe and in Africa. As a solo artist, Williams has also collaborated with the likes of the late Dizzy Gillespie, Van Morrison and Mavis Staples.
Lin Rountree
An accomplished smooth jazz artist who blends his chilled approach with R‘n’B. Trained at the Duke Ellington School of the Arts in Washington, DC, Rountree formed his own band in 2004. He has also recorded with the likes of Kem, Dwele and Conya Doss. He comes to Dubai on the back of his new single Pass The Groove, from his forthcoming 2018 album Stronger Still, which may follow his five previous solo albums in cracking the top 10 of the US jazz charts.
Anita Williams
Dubai-based singer Anita Williams will open the night with a set of covers and swing, jazz and blues standards that made her an in-demand singer across the emirate. The Irish singer has been performing in Dubai since 2008 at venues such as MusicHall and Voda Bar. Her Jazz Garden appearance is career highlight as she will use the event to perform the original song Big Blue Eyes, the single from her debut solo album, due for release soon.
Earth under attack: Cosmic impacts throughout history
- 4.5 billion years ago: Mars-sized object smashes into the newly-formed Earth, creating debris that coalesces to form the Moon
- 66 million years ago: 10km-wide asteroid crashes into the Gulf of Mexico, wiping out over 70 per cent of living species – including the dinosaurs.
- 50,000 years ago: 50m-wide iron meteor crashes in Arizona with the violence of 10 megatonne hydrogen bomb, creating the famous 1.2km-wide Barringer Crater
- 1490: Meteor storm over Shansi Province, north-east China when large stones “fell like rain”, reportedly leading to thousands of deaths.
- 1908: 100-metre meteor from the Taurid Complex explodes near the Tunguska river in Siberia with the force of 1,000 Hiroshima-type bombs, devastating 2,000 square kilometres of forest.
- 1998: Comet Shoemaker-Levy 9 breaks apart and crashes into Jupiter in series of impacts that would have annihilated life on Earth.
-2013: 10,000-tonne meteor burns up over the southern Urals region of Russia, releasing a pressure blast and flash that left over 1600 people injured.
MATCH INFO
Manchester United 1 (Rashford 36')
Liverpool 1 (Lallana 84')
Man of the match: Marcus Rashford (Manchester United)
SPEC%20SHEET%3A%20APPLE%20M3%20MACBOOK%20AIR%20(13%22)
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In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
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David Haye record
Total fights: 32
Wins: 28
Wins by KO: 26
Losses: 4
The specs: Fenyr SuperSport
Price, base: Dh5.1 million
Engine: 3.8-litre twin-turbo flat-six
Transmission: Seven-speed automatic
Power: 800hp @ 7,100pm
Torque: 980Nm @ 4,000rpm
Fuel economy, combined: 13.5L / 100km
Ruwais timeline
1971 Abu Dhabi National Oil Company established
1980 Ruwais Housing Complex built, located 10 kilometres away from industrial plants
1982 120,000 bpd capacity Ruwais refinery complex officially inaugurated by the founder of the UAE Sheikh Zayed
1984 Second phase of Ruwais Housing Complex built. Today the 7,000-unit complex houses some 24,000 people.
1985 The refinery is expanded with the commissioning of a 27,000 b/d hydro cracker complex
2009 Plans announced to build $1.2 billion fertilizer plant in Ruwais, producing urea
2010 Adnoc awards $10bn contracts for expansion of Ruwais refinery, to double capacity from 415,000 bpd
2014 Ruwais 261-outlet shopping mall opens
2014 Production starts at newly expanded Ruwais refinery, providing jet fuel and diesel and allowing the UAE to be self-sufficient for petrol supplies
2014 Etihad Rail begins transportation of sulphur from Shah and Habshan to Ruwais for export
2017 Aldar Academies to operate Adnoc’s schools including in Ruwais from September. Eight schools operate in total within the housing complex.
2018 Adnoc announces plans to invest $3.1 billion on upgrading its Ruwais refinery
2018 NMC Healthcare selected to manage operations of Ruwais Hospital
2018 Adnoc announces new downstream strategy at event in Abu Dhabi on May 13
Source: The National
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What are the GCSE grade equivalents?
- Grade 9 = above an A*
- Grade 8 = between grades A* and A
- Grade 7 = grade A
- Grade 6 = just above a grade B
- Grade 5 = between grades B and C
- Grade 4 = grade C
- Grade 3 = between grades D and E
- Grade 2 = between grades E and F
- Grade 1 = between grades F and G
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now
GROUP RESULTS
Group A
Results
Ireland beat UAE by 226 runs
West Indies beat Netherlands by 54 runs
Group B
Results
Zimbabwe tied with Scotland
Nepal beat Hong Kong by five wickets
Cry Macho
Director: Clint Eastwood
Stars: Clint Eastwood, Dwight Yoakam
Rating:**
