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Very lucrative role of the lead underwriter to the forthcoming IPO of state-owned Saudi Arabian Oil Company slated to become the largest public offering in history, will likely fall to JP Morgan Chase & Co.
JPMorgan Chase seems it may win the lead advisory role for the initial public offering (IPO) of the world’s most profitable corporation – Saudi Aramco, defeating rivals for the plum assignment. Sources familiar with the matter said the final decision is expected this week and could still change.
Morgan Stanley, which had been competing with JPMorgan for promoting on the case, suffered a lot mostly because of the fact they lead the Uber IPO.
Uber is, as it’s already known, is mostly owned by Saudi officials through the country’s sovereign wealth fund, and they were unsatisfied with Morgan Stanley after their bankers got the wrong conclusion about the demand for the ride-sharing company’s stock back in May. The shares went down by 18% in the first two days of trading and are still well below the IPO price of $45 ($31.86 at the time of writing).
This move would complete years of efforts made by global investment banks in order to attract the Saudi kingdom for profitable deals. An IPO of state-owned Saudi Aramco, the biggest world oil company and the Saudi government’s main source of revenue, has been the main feature of the Crown Prince Mohammad bin Salman’s plan to diversify the country away from fossil fuels.
The title of the lead advisor is a pretty big deal that not only gives JPMorgan a chance to have the biggest share of fees from a Saudi Aramco IPO, but, if played well, gives the company a chance for great future.
Lead advisors are usually aware of the most important discussions involving major decisions with the IPO, and are capable to coordinate other investment banks on the deal as they distribute shares to the respective institutional clients.
Until recently, JPMorgan was always put somehow behind Morgan Stanley and Goldman Sachs when it comes to advising on IPOs.
Its longtime CEO and chairman of JPMorgan Jamie Dimon now obviously has the reasons to celebrate almost sure won of the listing by his bank. Last year, Saudi company announced $111.1 billion in profit and that’s more than double of that of an Apple.
However, this is the second time that Saudi officials summoned few banks for a potential listing. Last year, Mohammad bin Salman, known as MBS, delayed the deal as Saudi Aramco pursued a $69 billion takeover of a Saudi chemical producer. Saudi officials then have claimed they wanted to raise $100 billion by selling a 5% stake in Saudi Aramco, valuing the company at $2 trillion.
Just for comparison – that’s far more than the $25 billion raised in the 2014 IPO of Alibaba. Now, MBS is encouraged to push even more with a listing as early as November – few months ahead of earlier reports that they sought to list in 2020 or 2021.
This plan is first on the list of Saudi exchange this year, selling perhaps $25 billion worth of shares, then to sell stock in London or New York next year.
The reason for the hurry lays mostly in the worries stock markets might be less open-minded to the enormous share offering that should happen sometime next year. The so-called IPO window may close because of the ongoing recession and market’s decline.
After they select their advisers, Saudi officials and their bankers will make a final decision on whether they’ll go with an IPO and talk over the valuation it is seeking in October.
A sudden crash in equity markets or the price of oil could rush the deal once again but for now, it seems that Saudi officials believe the international dismay over the murder of Post columnist and journalist Jamal Khashoggi has receded.