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Chris Hughes

Aramco Budges on $2 Trillion and Dangles Gifts, Too

A lower-than-mooted valuation and dividend inducements may attract investors to the world's biggest oil IPO, but larger risks remain.

A giant IPO comes with plenty of inducements, and plenty of risks.

A giant IPO comes with plenty of inducements, and plenty of risks.

Photographer: Mohammed Al-Nemer/Bloomberg

The initial sales pitch for Saudi Aramco, the world’s largest initial public offering, was pretty clear when it was launched on Sunday: This company can pay chunkier dividends for longer, and more reliably, than any other big oil major. The hope is that investors will therefore pay a premium for the shares that carry those dividend promises. Whether they do should depend on their attitude to Aramco’s singular strategic profile and emerging-market risks.

Saudi Arabia has finally kicked off the long-anticipated share sale, having accepted that the market may not ascribe the $2 trillion valuation Crown Prince Mohammed bin Salman had sought for the kingdom’s state-owned oil producer. While there’s no price range just yet, bankers may target a $1.6 trillion to $1.8 trillion valuation, according to Bloomberg News. Factor in the standard 10% to 15% discount on IPOs, and that is where you would pitch a $2 trillion offering anyway.