The monster Saudi Aramco bond offering may have just doomed its IPO

Michael Bradley, managing director for energy strategy at investment bank Tudor, Pickering, Holt & Co, says Tuesday’s bond issuance could allow the IPO to be pushed back because there is no rush to raise cash. However, he believes it ultimately creates a much smoother path to the stock market debut.

On the political side, the bond sale shows that investors will not be detracted by the Khashoggi killing, he said. Just six months ago, the conventional wisdom was that the incident left Saudi Arabia with little political capital and the kingdom would have to keep oil prices low to appease the Trump administration, Bradley noted.

Instead, Saudi Arabia has slashed its output this year, helping to boost benchmark oil prices by 30-40% this year and reassuring investors of its influence over the market. The public disclosures in the bond prospectus have also put to bed some “nagging questions,” removing an element of uncertainty.

“I personally think the public disclosures make the IPO much easier to float because a lot of info has been revealed which will help in the range of pricing when the deal is floated,” Bradley said in an email.

“Bottom-line, the massively oversubscribed Aramco bond deal (way exceeded the most wild expectations) bodes well for the success of an eventual Aramco equity IPO.”