- REUTERS/Hamad I Mohammed/File Photo
- Investment banks that worked on Saudi Aramco’s record initial public offering could miss out on a huge payday now that the IPO is being kept local, Bloomberg reported.
- While advisers and arrangers will be compensated for costs, it may not be enough to make a significant profit, according to the report.
- It’s now likely that Saudi banks will reap most of the fees from the $25 billion Aramco is looking to raise, as most investors will come from inside the kingdom.
- Read more on Business Insider.
Investment banks that worked on Saudi Aramco’s record-breaking initial public offering could miss out on a massive payday now that the IPO is being kept closer to home, Bloomberg’s Matthew Martin, Javier Blas, and Dinesh Nair reported Tuesday.
That’s because banks like Goldman Sachs and Morgan Stanley will reap less in fees now that Saudi Aramco will keep the IPO within Saudi Arabia, according to Bloomberg. In addition, while advisers and arrangers will be compensated for costs, it may not be enough to make a significant profit, the report stated, citing people familiar with the deal.
It was expected that more than two dozen advisers – including banks, lawyers, marketing and advertising agencies – would be paid between $350 million and $450 million, Bloomberg reported in October. Now, however, the payout amount will depend on how much Aramco equity banks can place with investors, according to the report.
The Saudi Aramco IPO was a highly coveted project to work on, and it drew a huge group of 20 global investment banks, nine global coordinators, 15 bookrunners, and three financial advisers, according to the report. But after Wall Street banks were unable to hit Crown Prince Mohammed bin Salman’s $2 trillion valuation target with a 5% sale, both the Saudi government and leaders of Aramco grew frustrated, Bloomberg reported.
Now, it’s likely that Saudi banks will reap most of the fees from the sale of Aramco, Bloomberg reported. This is because most of the $25 billion that Aramco is trying to raise will come from investors inside Saudi Arabia, according to the report.
On Sunday, the state-owned oil giant announced an IPO range that placed its valuation up to $1.7 trillion. That’s the largest IPO ever, even though it was below the Crown Prince’s goal of a $2 trillion valuation.
But on Monday, investors learned that the London IPO roadshow had been canceled along with the company’s Asian and American roadshows, making it a Saudi-only affair.