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Aramco IPO is Extortion on a Grand Scale
Now that the IPO results are coming in, commentators are applauding it as a move away from Saudi Arabia's near total dependence upon oil and into other ventures like real estate, tourism, entertainment, and manufacturing. Said the Wall Street Journal at the end of the first day of trading: "The public offering of the world's most profitable company is part of a sweeping overhaul of the kingdom's economy to invest in non-oil industries and create jobs for young Saudis."
A closer look reveals no such thing. By nearly every metric, the Aramco IPO was a failure. It posted an initial value of the company below bin Salman's value of $2 trillion and generated just one quarter of the $100 billion he claims he needs to bring his sand and oil empire into the 21st century by diversifying into entertainment, manufacturing, and tourism. By the second day, shares in the tiny Saudi-controlled Tadawul stock exchange had jumped 20 percent, but by that time the Prince was out, licking his wounds, and no doubt wondering how he was going to fulfill the promise of his Vision 2030 without the additional billions. He was also no doubt pondering just how much longer his kingdom could run double-digit billion-dollar deficits.
Aramco's CEO put the best face he could on the fiasco:
We are happy on the results today. And you have seen the market responds to our results, the company will continue to be the leader globally when it comes to the energy sector and at the same time we are looking at sustained and growing dividends to our investors. At the same time we continue our growth strategy, increasing profitability across cycles.
On the other hand, Ellen Wald, author of "Saudi, Inc." (a look behind the façade of Crown Prince Mohammed bin Salman's ruthless murderous oil empire), called the first day's results a "hollow win," adding that "The local demand from retail investors wasn't as high as (Saudi Arabia) hoped for. The investments were almost entirely local and attracted [almost] no money from outside the region … the government had to manufacture demand [for shares]."
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