Saudi Aramco takes steps to maximize IPO valuation

Updated 20 June 2017
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Saudi Aramco takes steps to maximize IPO valuation

DUBAI: The government of Saudi Arabia and Saudi Aramco are taking further steps toward maximizing the value of the state-owned oil giant in preparation for the sale of shares to citizens and international investors next year, according to reports.

The measures reportedly include moving some liabilities from Aramco to the government, as well as clarifying the relationship between the oil company and some of the non-oil projects it funds within the Kingdom.

According to a report by the Financial Times (FT), Aramco is looking to present potential investors with a set of “pristine” financial accounts designed to back up the official valuation of $2 trillion put on the company, the largest oil group in the world.

A spokesman for Aramco declined to comment on the report because the matters were still under consideration.

Another person familiar with the matter said that preparing detailed financial accounts was a normal part of the preparation process for an initial public offering (IPO) of shares on a stock exchange.  

There has been some skepticism among international energy analysts that the $2 trillion valuation figure will be reached, but — following a change to the Kingdom’s treatment of oil company taxation earlier this year — independent valuations have been moving upward toward the target.

One factor thought to be affecting investor sentiment has been Aramco’s historic financial support of non-oil projects, ranging from hospitals to sports stadiums.

The spokesman said that such projects were “in the long-term commercial interest of Saudi Aramco and have no material impact on its result.”

In addition to the measures recently taken and the taxation change, Aramco is also believed to have commissioned a new estimate of its overall reserves, vital for deciding valuation and is working with advisers on deciding a dividend policy, which will help determine investor appetite for the shares in any IPO.

The FT, citing four people briefed on the matter, said that the moves “reflected efforts to present a streamlined set of financials to investors.”

It added that an instruction has been issued to shift historical debts from foreign governments, including Jordan and Iraq, from Aramco’s accounts on to the government’s books. 

Under a separate resolution the Kingdom plans to create a mechanism — via a special tax deduction — to compensate Aramco for the financial cost of subsidizing fuels such as petrol for domestic motorists and gas for power generation, the FT added.

It also said that payments owed to Aramco by state entities, such as the national airline Saudi Arabian Airlines, which is also known as Saudia, and the domestic utility Saudi Electricity Company (SEC), will be moved to the Saudi Ministry of Finance.

Aramco is believed to be preparing historic 2015 and 2016 financial statements alongside pro-forma accounts for 2017 to investors for the first time ahead of the IPO.

The market flotation of Aramco will be by far the biggest IPO in history, with a value of $100 billion if, as has been officially suggested, 5 percent of the shares are sold on a $2 trillion valuation.

It is the centerpiece of the Vision 2030 strategy aimed at reducing the Kingdom’s dependence on oil and at transforming the national economy, and will be part of a $300 billion plan to privatize assets held by the Saudi government.

People familiar with the situation say that Aramco has been in talks with the stock exchanges in New York and London with a view to listing some of the shares on those exchanges, in addition to the Tadawul in Riyadh and possibly an Asian stock market.

• Frank Kane is an award-winning business journalist based in Dubai. He can be reached on Twitter @frankkanedubai


SoftBank’s Son says Japan is ‘stupid’ to disallow ride-sharing

Updated 19 July 2018
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SoftBank’s Son says Japan is ‘stupid’ to disallow ride-sharing

  • ‘Ride-sharing is prohibited by law in Japan. I can’t believe there is still such a stupid country’
  • SoftBank and its nearly $100 billion Vision Fund have invested in ride-sharing firms Uber, Didi, Ola and Grab, as well as in other technology companies

TOKYO: SoftBank Group Corp. Chief Executive Masayoshi Son blasted Japan on Thursday for not allowing ride-sharing services, calling it “stupid” and saying the country was lagging overseas rivals in areas such as artificial intelligence (AI).
“Ride-sharing is prohibited by law in Japan. I can’t believe there is still such a stupid country,” Son said at an annual company event aimed at customers and suppliers.
The comments reflect Son’s frustration with Japan where he built SoftBank’s domestic telecoms business, the cash engine that has powered his investments. The group has, however, focused its growing range of technology investments overseas.
Son has also been highly critical of the government previously when SoftBank was still a fledgling telecoms service trying to break up a cozy duopoly in Japan.
“A country that gives up on the future has no future,” Son told attendees at the SoftBank World event, saying Japanese business is lagging behind countries such as the United States and China in employing AI.
Japan outlaws non-professional drivers from transporting paying customers on safety grounds and the country’s taxi industry lobby has vigorously opposed deregulation.
Its strict rules have confined ride-sharing firms to providing limited services, with SoftBank and China’s Didi Chuxing saying on Thursday they will trial a taxi-hailing service — matching users to pre-existing taxi operators — in Osaka beginning autumn of 2019. Uber is also piloting a taxi-hailing service.
When asked for a response to Son’s comments, a spokesman for the Ministry of Land, Infrastructure, and Transport said that an issue with ride-sharing services was that while the driver was in charge of transporting passengers, it was unclear who was in charge of maintenance and operation.
“The ministry believes that offering these services for a fee poses problems from the points of both safety and user protection, and careful consideration is necessary,” he said.
Ride-sharing is not the only service in Japan feeling the impact of government restrictions. Strict new rules on home-sharing came into force last month that have radically reduced the number of lettings on sites such as Airbnb Inc.
The curbs on Japan’s nascent sharing economy come despite a rapid rise in the number of inbound tourists likely to access such sharing services, and at a time when Japan is wanting to show its international face ahead of hosting the Rugby World Cup next year and the Summer Olympics in 2020.
While Son, an ethnic Korean born in Japan, has at times criticized the Japanese government, he can also be politically suave. He has praised US President Donald Trump with warm words and pledged to invest billions of dollars and create thousands of jobs in the United States.
SoftBank and its nearly $100 billion Vision Fund have invested in ride-sharing firms Uber Technologies Inc, Didi, India’s Ola and Southeast Asia’s Grab, as well as in other technology companies.
The event on Thursday saw presentations from executives at portfolio companies including Didi, General Motors’ autonomous vehicle unit Cruise and India digital payments firm Paytm E-Commerce Pvt Ltd.
Artificial intelligence is the common thread linking these companies, Son said, with that technology in the future able drive vehicles, diagnose diseases and power financial services.