I cannot believe how the Western press is smearing this IPO. Everywhere I read, “failure”, “did not make the $2 trillion”, etc. From where I am sitting, this looks like a great IPO for Saudi Arabia. Why is the West slamming this IPO? I can think of many reasons; but lets look at what the Saudis are doing.
It appears that Saudi Arabia is keeping this a mostly Islamic affair. As the Italians would say, “Cosa Nostra”, or “Our Business”. What I see is that the Saudis are getting money mostly from their own citizens that have a lot of wealth – many of these same individuals were under house arrest just a few years ago. They are also getting money from other Islamic oil rich nations. About 95.5% of the money is being raised like this, while the other 0.5% is being sold to “retail” investors.
This is making the West angry because they are missing out on making the money. However, everyone pretty much knows that the West believes in “leaving money on the table”. In other words, a huge investment bank can buy up most or all of your shares; but, the stock has to be undervalued significantly. Why? Well, if the business sells the stock to the investment bank for $10/share; and the stock opens on Wall Street at $20, that is an automatic windfall profit of $10/share for the investment bank. Executives really like this because many times their only salary is stock. There are complaints that Aramco is not leaving any money on the table.
I remember when Blackstone Group launched their IPO. I had read so much about this company over the years. They were buying up companies, then selling them for huge profits. Back in the summer of 2007, I bought Blackstone approximately on the 3rd day after it opened on Wall Street. The stock went straight down for the next couple of years. I bought it at $27 and the stock tanked to as low as about $5. The stock opened at about $30 on its first day.
I was not the only one that was angry. Wall Street screamed foul. How could Schwarzman do this to us? He already has so much money and he did not leave any money on the table? He decided to gouge us? Allegations surfaced claiming that Blackstone “cooked” the books. There was fake accounting going on to make the IPO look good, the accusations continued. Guess how all the allegations were put to rest? Blackstone gave out a pretty healthy quarterly dividend on a stock that was basically worthless. The plan worked because everyone just, for the most part, shut up.
There is one other very sensitive issue to consider. What I see with my own two eyes, is that the Islamic world is suspicious of Wall Street because they see too much Jewish influence there. Whether Wall Street is that way or not, it does not matter; because this is the Islamic paradigm – or at least, how it appears to me. So, if Aramco is sold mostly to the Islamic world, well, that is a feather in the Saudi hat. On top of that, the stock is being sold on the Saudi stock exchange. If I were to walk in the shoes of an Arab, I cannot see how this IPO is bad for Aramco – neither financially, nor politically.
Remember, this is a commentary – just a casual observation. I welcome comments. If you see it differently, then please let me know.