By Daniel Mauro
Regarding Saudi Arabia’s difficulties in pulling off an initial public offering of Saudi Aramco, it is long past time to say what needs to be said: crown prince Mohammed bin Salman is in over his head, in addition to being a brutal authoritarian, as evidenced by the murder of Jamal Khashoggi. His incompetence has been on tragic display in Yemen, with his war on the Houthis turning into a quagmire and a humanitarian crisis.
Far from tragic, but perhaps more preposterous, is his insistence that state oil group Saudi Aramco be listed at a valuation of $2tn, as if he can dictate the valuation by fiat. As much as western investment bankers would like to curry favour with the crown prince, no serious asset manager would invest in an oil company effectively controlled by a capricious young tyrant in what is perhaps the world’s most volatile region at anywhere near $2tn.
If an investor is looking for energy exposure, western oil majors are trading at significant discounts to shares in competing economic sectors without the significant political risks of an investment in Aramco.
With the Aramco IPO, the young prince is finally running into reality, where money talks and nonsense, in the end, walks. It’s about time.
Source: Financial Times, Edited by Website Team
