Saudi Aramco sidelines big global banks in IPO process

Edmund Heaphy
·Finance and news reporter
A picture taken on November 3, 2019 shows a sign of Saudi Aramco's initial public offering (IPO) during a press conference by the state company in the eastern Saudi Arabian region of Dhahran. - Saudi Aramco confirmed it planned to list on the Riyadh stock exchange, describing it as a "significant milestone" in the history of the energy giant. (Photo by - / AFP) (Photo by -/AFP via Getty Images)
A picture taken when Saudi Aramco launched its IPO earlier this month. Photo: AFP via Getty Images

Oil giant Saudi Aramco has sidelined all but one global bank in the final stage of its IPO process, having chosen just HSBC and two local brokers to oversee all investor orders.

The move means that the six other “global co-ordinators” picked to lead the flotation — Goldman Sachs, JPMorgan, Bank of America, Citigroup, Credit Suisse, and Morgan Stanley — will take a backseat role in the process, according to the Financial Times.

Those banks will have to route their orders through HSBC, while Saudi Arabia’s NCB Capital and Samba Capital, which will also have oversight of all investor orders, will receive them from domestic and Gulf investors.

Saudi Aramco has in recent days chosen to scale back its IPO efforts after it became clear the flotation would not receive the desired $2tn valuation.

While foreign investors have hesitated, local and Gulf investors have been more supportive of the deal, prompting Saudi Arabia to focus its attention on orders closer to home.

READ MORE: Saudi Aramco IPO could create world's biggest listed company

Largely based on the local support, the IPO is now expected to receive a $1.7tn valuation.

According to the Financial Times, most of the banks that have been sidelined had spent years wooing Saudi Aramco, in the hopes of receiving bumper fees for helping with the process.

Because it has a stake in the Saudi British Bank, HSBC has a stronger local presence in the region.

Based in Riyadh, Saudi British Bank is one of the five largest banks by deposits in Saudi Arabia, and has considerable operations in the country.

The oil giant earlier this month launched the long-awaited IPO process, and shares in the firm will list on the local Saudi stock exchange from December.

The proposed listing was first mooted around three years ago by Saudi Crown Prince Mohammed bin Salman.

But the plan has progressed in fits and starts since then, largely because of hesitations surrounding the valuation.