Aramco float moves into reverse gear as tech scores new victory over old world companies

Saudi Arabia is borrowing $11 billion. The Aramco float seems to be going nowhere fast, the final triumph of new tech over old world business is almost complete.

Article updated: 30 August 2018 7:00am Author: Michael Baxter

The Aramco float is not going well. To remind you, Aramco is the state owned Saudi oil industry; plans to float it (part of it) were revealed a couple of years ago. Estimates on how much the company would be worth varied, from $4 trillion, which was a Saudi estimate, to not much more than a trillion dollars. It seemed clear, though, Aramco would become the largest listed company in the world.

To put that valuation in context, the world’s largest listed company right now is Apple; market cap: $1.06 trillion. Number two is Amazon; market cap: $0.97 trillion.

Then again, if Apple and Amazon continue growing at the pace we have been seeing over the last few years, and if the Aramco float takes too long to happen, it may not be the biggest. Apple’s share price has doubled in just under four years, Amazon’s share price has doubled in the last 15 months.

Now Saudi has confirmed that the Aramco float has been put on hold, although it says it will happen eventually.

Why the delay/cancellation?

There is more than one reason for the delay/cancellation.

For one thing, when plans to float the company were first revealed, it seems that Saudi’s ruler in waiting, Mohammad bin Salman bin Abdulaziz Al Saud, was being a little impetuous — a bit like Elon Musk’s recent tweet to take Tesla private; although, of course, Musk was talking about the complete opposite of floating.

For another thing, Saudi has been making oodles of money by arresting princes and then releasing them for, well for a king’s ransom.

For another thing, Aramco is one of the most secretive organisations in the world; a flotation would require the complete opposite; total transparency. Such a change in company culture could not occur in any short time frame.

There is a view that seems to be gaining ground that Mohammad bin Salman’s father, King Salman, made the decision to pull the float, after meeting various bankers and senior oil industry executives and a former Aramco CEO. It does seem that fears concerning the level of transparency required were behind the king’s decision.

There is even talk that the king is reining back on his son’s authority to instigate reforms.

There is a deeper force at play.

The threats to oil

Tech is evolving so fast, the cost of renewables falling so fast, the cost of energy storage falling so fast, the reality of climate change becoming so obvious that your name needs to be Nigel Lawson not to see it, the dangers in plastic and the importance of plastic recycling and alternatives so important — that oil is dying.

They say data is the new oil. They could just as easily say lithium is the new oil. In a few years time stem cell technology and the gene editing technology CRISPR/cas-9 could become the new oil.

The dominance of oil is coming to an end; it is coming to an end because it has to; climate change has to be slowed, it is also coming to an end because attractive alternatives are emerging.

As Elon Musk says, the oil hegemony will inevitably end because we will run out; the only difference is that fears over climate change are accelerating the move away from oil dependence by a few years.

In the peak oil model, the one that suggests oil supply will dry up, the oil price was expected to carry on rising. In the new model, the one that says tech will create alternatives, the oil price is likely to fall — although I still believe the oil cycle has one more swing upwards before it dies.

The above explanation is surely the underlying reason for the delay in the float, I personally doubt it will happen.

Jaguar is even making an electric version of the E-Type, the rise of the electric car is accelerating.


The valuation of Aramco was all about projected dividends, discounted to give a net current value.

I suspect that projected dividends twenty years or so out were not that attractive, reducing the potential valuation, meaning that the benefits of IPO were insufficient to make up for the loss of secrecy.


The Saudi economy needs reform; Mohammad bin Salman knows this, hence his bold plans, including the creation of Neom, a tech city in the desert.

If reports that his father has clipped his wings are true, and we see a slow down of reformation in Saudi, both the economy and human rights — which in any case was not looking promising — then that does not bode well.

But one could also say ditto — or a partial ditto — when talking about the oil industry; investors need to factor this in.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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