Honestly the Saudi Aramco IPO seems extremely janky, and teetering on failure to me:
1). Aramco generated $111bn in profit in FY 2018, if whispers about only a 1.5% float are true, that represents only ~$25bn in proceeds, which they could generate in a single quarter.
2). Saudis obviously want to diversify and reinvest proceeds / dividends through their sovereign wealth fund, and I'm sure their intention was to diversify their holdings by more than 100% -> 98.5%.
3). They are offering an ownership bonus of 1 share for every ten owned, like some sort of lunch card. This artificially boosts the valuation, because investors will value the company about 10% higher than I would otherwise, and is in effect the equivalent of issuing new shares without explicitly doing so.
4). This strongly suggests that something did not go as planned: by floating very small, Aramco can capture the investor base that values them most highly. This whole IPO seems like it went from "diversification" to "face-saving".
Read here for more discussion, if you disagree or have other thoughts
Submitted November 17, 2019 at 08:56PM by webworker1 https://ift.tt/2rVGixf
