In an investor relations revolution, Aramco opens up to scrutiny
There is an investor relations (IR) revolution under way across the Middle East, as regional corporations increasingly appreciate the real financial benefit they can get from sound IR practice.
That process — steadily growing in strength in recent years — is set for its biggest boost yet as Saudi Aramco, the Kingdom’s leading company, jumps aboard the IR train with enthusiasm and commitment.
The willingness to communicate with stakeholders — equity owners, bankers and business partners — is an intrinsically good thing in the corporate world. Studies have shown repeatedly that companies that adopt active communication policies enjoy a higher share price (if they are listed) and/or cheaper access to capital (if they are private). It is a win-win situation.
A couple of months ago Aramco joined the growing number of investor-friendly companies in the Gulf when it launched an IR platform on its website. In a couple of weeks it will take the process further when it stages its first ever live audio webcast with analysts, oil industry experts and journalists to discuss its financial results for the first half of 2019.
The huge prospectus produced as part of the bond issuance process contains more information about Aramco than has ever previously been disseminated.
Such forums are commonplace in business around the world, but for Aramco it is a pioneering event. The company — which has in the past had no need nor desire to go fully public on many aspects of its operations — is opening a new phase in its journey from state-owned cash generator to committed participant in the international corporate scene.
Some skeptics have questioned the logic of the webcast initiative. After all, Aramco is still a state-owned entity. Why bother with mass communication when all the conversation that really matters can take place in the privacy of a royal majlis?
This misses the point. The record-breaking bond Aramco issued in the spring, when it raised $12 billion on global debt markets, gives it a new stakeholder base to address in the form of banks who fell over themselves in the rush to lend it money.
More importantly, the webcast will set the tone for what promises to be an increasing engagement with the investment world. Aramco is committed to an initial public offering (IPO) by 2021. By then, it will have thousands of new investors to inform.
The impending IPO is likely to be the number one question on the lips of webcast participants. Amin Nasser, its CEO, recently fueled speculation that Aramco might actually go for the IPO next year, earlier than the official timetable. He will surely be pressed on that.
He will also be asked about progress towards full integration of Sabic, the Saudi industrial giant Aramco bought this year. This has a bearing on the IPO timing too, because Aramco executives have made clear they need Sabic on the balance sheet before they sell any shares. It all looks on track to be a fully integrated part of Aramco by the end of this year.
Nasser and his fellow executives will have a veritable trove of information on hand. The huge prospectus produced as part of the bond issuance process contains more information about Aramco than has ever previously been disseminated. It also goes a long way towards providing the depth of information that will have to be included in a listing document for the IPO, depending on the requirements of whichever stock market Aramco eventually choses.
The IR platform on the company website is still in its formative phase, but already contains a lot of essential information, and bears comparison with IR platforms of industry peers like Exxon Mobil and BP. It can only improve.
One apparent omission that could be easily rectified would be to provide a link to the bond prospectus for ease of reference. Maybe Aramco will consider that.
These and other questions will be on the agenda for the webcast event on Aug. 12. It promises to be a fascinating exercise in stakeholder democracy.
• Frank Kane is an award-winning business journalist based in Dubai. Twitter: @frankkanedubai