J.P. Morgan is expected to win the lead advisory role in what could be the biggest IPO in history. Saudi Aramco, the world’s most profitable corporation, is said to be prepping for its initial public offering. The final decision is rumored to be made next week but there might be some changes.
Saudi Aramco made $111.1 billion in profit last year. This is more than double what Apple had made in 2018.
Morgan Stanley is also in the running for a lead role in Saudi Aramco’s IPO. However, Saudi officials might have been peeved with the way the company handled Uber’s IPO.
Through the country’s sovereign fund, Saudi officials own about 10% of the ride-hailing company, Uber. The dissatisfaction might have stemmed from Morgan Stanley’s misjudgment of the demand for Uber’s stock in May. The shares dropped 18% in the first two days of trading. It’s is still below the $45 IPO price.
Whoever takes the role of the lead advisor is set to win big. If J.P. Morgan is awarded the role, it would be seeing a hefty fee from the Saudi Aramco IPO. If it can proceed with the listing successfully and smoothly, it would most likely be considered by the company in its future capital market ventures.
If J.P. Morgan becomes the lead advisor, it would be at the front row of discussions that involve the important decisions regarding the Saudi Aramco IPO. It would be working with other investment banks in dealing with the distribution of shares to their institutional clients.
When it comes to IPO advising, J.P. Morgan has trailed behind Morgan Stanley and Goldman Sachs. If J.P. Morgan takes the Saudi Aramco IPO lead advisor role, it would be a big boost to one of the leading financial service firms in the world.
The rumored IPO by Saudi Aramco is not the first time that the company has called on certain investment banks to discuss the possibility of a listing. This is their second attempt to gather the banks for a potential listing.
The plans for an IPO project was first announced back in 2016. This was a part of Vision 2030 which is a blueprint aimed at modernizing the Saudi economy. The target listing of Saudi Aramco was supposed to happen in the second half of 2018.
However, the planned IPO was put on hold by Mohammad bin Salman. Around that time, Saudi officials were aiming to raise $100 billion by selling a 5% stake in Saudi Aramco, putting the company’s value at $2 trillion.
If the Saudi company succeeds in raising $100 billion, it would overtake the $25 billion that Alibaba raised for its IPO back in 2014.
Saudi Aramco worked with several banks for two years before it decided to take a step back and put its plans on hold last year. It was working with Evercore Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Moelis & Co., and Morgan Stanley.
With the revival of its IPO plans, Saudi Aramco is facing some challenges specifically the capacity of the kingdom to come up with the $2 trillion valuations that it has been targeting for the company.
Saudi Aramco’s latest push for IPO listing is fueled by the great reception it got when it sold $12 billion worth of bonds in April.
People who are familiar with the matter said that detailed work regarding the IPO might come later this year or early next year. Mohammad bin Salman is said to be keen to push through with the listing this coming November. This comes much earlier than anticipated. Earlier reports have mentioned that the listing could happen in 2020 or 2021.
Reports have also mentioned the company would be listed first on the Saudi Stock Exchange this year. It would then sell about $25 billion worth of shares and then proceed to sell stocks in either the London Stock Exchange or the New York Stock Exchange in the next year.