The Wall Street Jourrnal reports that the Kingdom of Saudi Arabia has made a startling announcement:
Saudi Arabia plans to list up to 5% of its state-owned oil company on stock exchanges in Riyadh and possibly the U.S., setting up an IPO that could pose big rewards for bankers and even bigger risks for investors.
Deputy Crown Prince Mohammed bin Salman outlined the plan Monday. He said Saudi Arabian Oil Co., better known as Aramco, was worth between $2 trillion and $3 trillion. That means a 5% listing could in theory raise $100 billion to $150 billion for the kingdom as it works to defray the impact of the steep drop in oil prices.
As I see it there are a number of possible reasons for the development and they aren’t mutually exclusive:
- The KSA doesn’t have nearly as much oil as they’ve been leading us to believe.
- The KSA has seen a sudden uptick in its expenses or expects an uptick.
- They believe that their access to the international banking system may change and they want to get more money faster than they could be selling oil.
just to name a few. I don’t find any of those explanations particularly heartening.
Fascinating, isn’t it? They smell trouble coming, maybe more economic bad news, maybe a political blow-up over 911, probably a bit of both. I wonder what this does to transparency at Aramco? If they list on a US exchange, don’t they have to basically open the books?
That’s one of the interesting things. Maybe they plan to list on their own exchange (they have one). That would eliminate the pesky transparency requirements.
Or maybe the various organizations will be so damn greedy they’ll be willing to to certify that up is down and back is front. Or maybe they’ll give us the straight skinny and we’ll actually know what their reserves are like.
Hmmm… John Burgess’ blogsite has been suspended. I seem to recall he went on a temporary hiatus late last year for health reasons; I hope everything is ok.
I’ve reached out to him a couple of times over the last year without any responses.
“If they list on a US exchange, don’t they have to basically open the books?”
Yes, only the US government and the Fed enjoy unwarranted secrecy………..
Guarneri:
Then again, the US government doesn’t collect turds into bundles, mark them triple A and destroy the economy. Nah, you need the true financial whizbangs for that.
“Yes, only the US government and the Fed enjoy unwarranted secrecy”
OTOH, all that money hidden in Switzerland and other tax havens is clearly warranted secrecy.
Steve