Aug 23, 2018

Saudi Aramco's teetering IPO

Illustration: Sarah Grillo/Axios

Saudi Aramco's troubled IPO plan is increasingly looking dead, or at least in a deep freeze, but the Saudis pushed back against those reports late last night.

Driving the news: Reuters, citing "four senior industry sources," reported yesterday that Saudi Arabia had called off the plan to sell about 5% of the company. And a source familiar with the company's work with outside advisers and banks told me roughly the same thing after their story hit.

Why it matters: The kingdom had hoped to raise tens of billions of dollars through the IPO to help fund initiatives to diversify its oil-dependent economy away from crude oil sales.

But the plan to sell about 5% of the company has been beset with delays, indecision about an international listing venue, and related questions about the Saudis' appetite for the transparency that comes with going public.

  • Plus, multiple analysts believe the company would not achieve the kingdom's hoped-for $2 trillion valuation.

Yes, but: Khalid Al-Falih, the Saudi energy minister, pushed back againstyesterday's obits for the plan. "The Government remains committed to the IPO of Saudi Aramco at a time of its own choosing when conditions are optimum," he said.

  • Reality check: Absent from his lengthy statement is even a rough timeframe for the IPO.

One big question, via Axios' Dan Primack: The IPO's seeming demise, or at least deep freeze, could be good or bad news for the prospect of the Saudis bankrolling CEO Elon Musk's plan to take Tesla private.

  • The bullish case for Tesla: The Saudis think they can diversify their economy without the IPO, and Tesla could be one avenue.
  • The bearish case for Tesla: Without cash from the IPO, there's less money to spread around.

The intrigue: The fate of the IPO appears to be bound up in a separate transaction — Aramco's potential purchase of a controlling stake in the petrochemical firm Saudi Basic Industries Corp. (SABIC) from the kingdom's sovereign wealth fund.

  • Al-Falih's statement obliquely references this, noting the IPO timing will be affected by a "downstream acquisition which the Company will pursue in the next few months."
  • Bloomberg writes that could be a roughly $70 billion deal. "That will replace at least some of the money the Public Investment Fund had been expected to receive from the Aramco IPO," they report.

What they're saying:

  • Randy Bell, director of the Atlantic Council's Global Energy Center, tells Axios that the delay is a good development: "A delay suggests that Saudi leadership recognizes the challenge and is going to wait until they get it right to proceed. That should give the investor community more confidence in the country over the long run."
  • Jim Krane of Rice University’s Baker Institute for Public Policy says that while the rationale behind the IPO — raising money to diversify the economy — remains sound, the plan itself turned out to be "flawed": "Aramco executives worried that the company's vaunted autonomy and long-term planning would be sacrificed to meet short-term demands of shareholders."

Go deeper: I wrote about the rationale for pouring resources into SABIC here.

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U.S. coronavirus updates: Death toll passes 8,500

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios

Recorded deaths from the novel coronavirus surpassed 8,500 in the U.S. early Sunday, per Johns Hopkins data. The death toll in the U.S. has risen over 1,000 every day since April 1.

Why it matters: U.S. Surgeon General Jerome Adams said on Sunday that this upcoming week will be "the hardest and saddest week of most Americans' lives" — calling it our "our Pearl Harbor, our 9/11 moment."

Go deeperArrowUpdated 9 hours ago - Health

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 7:30 p.m. ET: 1,270,069 — Total deaths: 69,309 — Total recoveries: 259,810Map.
  2. U.S.: Total confirmed cases as of 7:30 p.m. ET: 335,524 — Total deaths: 9,562 — Total recoveries: 17,266Map.
  3. Federal government latest: Surgeon general says this week will be "our Pearl Harbor, our 9/11 moment." The USDA confirms that a Bronx zoo tiger tested positive for coronavirus.
  4. 2020 latest: "We have no contingency plan," Trump said on the 2020 Republican National Convention. Biden says DNC may have to hold virtual convention.
  5. States updates: New York Gov. Andrew Cuomo said the state is "literally going day-to-day" with supplies.
  6. World update: Queen Elizabeth II urges the British people to confront pandemic with "self-discipline" and "resolve" in rare televised address.
  7. What should I do? Pets, moving and personal health. Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it.

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Scoop: Inside the epic White House fight over hydroxychloroquine

Photo: Drew Angerer/Getty Images

The White House coronavirus task force had its biggest fight yet on Saturday, pitting economic adviser Peter Navarro against infectious disease expert Anthony Fauci. At issue: How enthusiastically should the White House tout the prospects of an antimalarial drug to fight COVID-19?

Behind the scenes: This drama erupted into an epic Situation Room showdown. Trump's coronavirus task force gathered in the White House Situation Room on Saturday at about 1:30pm, according to four sources familiar with the conversation. Vice President Mike Pence sat at the head of the table.

Go deeperArrowUpdated 36 mins ago - Health