Aramco IPO may fail to entice investors in Canada amid risks

Saudi Aramco may soon become the largest IPO in history, but a potential record-breaking raise alone may not be enough to intrigue Canadian investors already familiar with the struggling fortunes of Alberta’s oilpatch.

After months of intensifying speculation, Aramco CEO Amin Nasser announced on Sunday he had received approval from Saudi Arabia’s regulators to bring the state-owned giant to public markets. Shares of the world’s largest integrated oil and gas company will be listed on Saudi Arabia’s Tadawul exchange and is expected to begin trading next month.

Aramco’s leadership did not reveal how many shares the company will float or its valuation, but multiple reports suggest Saudi Arabia values the company at US$2 trillion, while Wall Street is projecting it to be worth anywhere from US$1.2 trillion to US$2.3 trillion. Even the lower end of that range would allow it to surpass Apple Inc. as the world’s most valuable company.

Aramco, however, may have trouble drumming up the degree of retail fanfare that has fuelled the successful launches of other recent IPOs — especially in Canada, according to Baskin Wealth

Management chief investment officer Barry Schwartz.

“My dad is a do-it-yourself investor. How in the world is he ever going to buy this stock?” said Schwartz, referring to the company being listed in Saudi Arabia. “I don’t see a warm reception in Canada.”

Schwartz said he is not interested in the company and won’t be reading the prospectus, rattling off a string of problems posed by the listing: He doesn’t know what the company’s dividend policy will be, what the exchange rate to the Saudi riyal is, or how investors will react to backing a company that is owned by an oppressive government. In Saudi Arabia, investors may have to worry about the potential for Saudi Crown Prince Mohammad bin Salman to interfere in the company’s operations. Aramco reserves were also recently a target of a foreign drone attack that resulted in a 50 per cent cut in production.