Five Things To Know About Saudi Arabia And Its Mammoth IPO

In this file photo taken on September 20, 2019, a general view of Saudi Aramco’s Abqaiq oil processing plant. Saudi Aramco said it will list on the Riyadh stock exchange in what could be the world’s largest IPO, underpinning Crown Prince Mohammed bin Salman’s ambitions to overhaul the kingdom’s oil-reliant economy. PHOTO: FAYEZ NURELDINE / AFP

 

Ultra-conservative Saudi Arabia is undergoing a major transformation under Crown Prince Mohammed bin Salman, who intends to end the kingdom’s addiction to oil revenues.

As the country opens up on the economic front, there have also been some social reforms including more freedoms for women, but progress has been erratic and critics pushing for faster changes have ended up in jail.

The crown prince’s most ambitious economic initiative so far has been to push the state energy giant Aramco towards a stock market debut. After years of delays, the green light was announced on Sunday.

Why is the IPO such a big deal?

The sale of part of Aramco forms the foundation of Prince Mohammed’s turnaround plan for Saudi Arabia. The size of the listing remains in the air, but originally it was hoped it could generate as much as $100 billion.

That figure, based on a $2 trillion valuation of the company now seen as unrealistic, may not be reached but even so it it is likely to be the biggest share market offering of all time.

That money is needed to fund mega-projects like NEOM, a $500 billion futuristic mega city planned on the northern Red Sea coast, which officials say will have flying taxis and talking robots.

With no foreign listing planned at the moment, the crown prince will be relying on Saudi billionaires to heavily support the offering, and the kingdom’s representatives are reportedly visiting global capitals to woo investors further afield.

Will it be a success?

After years of stop-start progress towards the IPO, scepticism abounds and the new stock will be under close scrutiny when it launches on the Saudi bourse in coming weeks.

Apart from holding out for the big-ticket valuation, the delays are also said to be related to Saudi concerns that a foreign listing could shine an unwelcome light on the secretive company’s finances and inner workings.

“Should shares fall sharply after they begin trading, it would be a highly visible blow to the credibility of the economic reforms so closely associated with Mohammed bin Salman, which is why the valuation is so important,” said Kristian Ulrichsen, a fellow at Rice University’s Baker Institute in the United States.

“International investors will pay very close attention to how Aramco performs on the domestic exchange, especially in the absence of any firm detail over the international portion of the eventual dual listing.”

Why is Aramco so important?

Aramco pumps about 10 percent of the world’s oil from its wells beneath the desert sands — mostly in the kingdom’s east but also in the evocatively named “Empty Quarter” in the south. There are also some major offshore oil fields.

The energy behemoth generated the most profit of any corporation last year with net income of $111 billion — more than Apple Inc., Google’s parent Alphabet Inc. and Exxon Mobil Corp. combined.

The fate of Aramco is fundamental to world energy supplies — which was illustrated when oil prices were sent spiking after two of its facilities were targeted with strikes in September, temporarily knocking production down by half.

 How is MBS remaking the economy?

Even before he became crown prince in June 2017, the son of King Salman — often known by his initials MBS — had announced a plan to diversify the economy and push it away from its long reliance on oil.

Since then, the kingdom has witnessed a number of never-before-seen initiatives, mostly related to entertainment and tourism, including vast multi-island luxury destination projects.

Women were made more welcome in the workforce, concerts opened to Saudis, international sports events were given the green light, and the first tourist visas were issued.

Amid low oil prices, the kingdom also increased the prices of fuel and electricity, imposed a five percent value added tax (VAT) and levied duties on 11 million expatriates in a bid to generate additional revenue.

Selling the crown jewels

Aramco’s IPO has generated a feeling of pride among Saudis, although some are concerned about sharing the “family jewel” with foreigners.

“Aramco means family. From the work environment to the personalities you come across, it feels natural. It feels like home,” Naif Ghofaily, an Aramco employee in his 30s, told AFP.

“The sale has brought a lot of exposure for the company on a global scale. Although one of the biggest companies in the world long before its proposed listing, I feel as if many more people recognise Aramco today.”

Many of the employees live on plush company compounds, meaning that their immersion is total — particularly in a country where cities and towns offer few attractions.

For another employee, 33-year-old Haya, the landmark IPO risks “changing” the company.

“I was born in Aramco, my dad worked for Aramco for more than 50 years, both my parents retired from Aramco, I live in Aramco. To me Aramco is my home,” she told AFP.

“I’m feeling nervous about the IPO, I grew up planning for my kids to live the life I experienced in Aramco and I’m worried that with the IPO it won’t be the Aramco that we know.”

AFP

Pinterest Sets IPO Price Range, To Raise Up To $1.5bn

Pinterest said Monday it would raise up to $1.5 billion in its stock offering, setting a price range that trims the value of the online visual discovery startup.

San Francisco-based Pinterest’s price range of $15 to $17 a share would give it an estimated valuation of some $11 billion, below the $12 billion in its most recent private funding round.

The pricing suggests caution about the big venture-backed “unicorns,” or startups worth more than $1 billion, after a mixed response to the Wall Street debut of ride-hailing firm Lyft.

Pinterest, a virtual bulletin board that connects people with interests including food, fashion, travel, and lifestyle, plans to trade under the symbol PINS on the New York Stock Exchange.

Pinterest has some 250 million worldwide users but its path to profitability remains uncertain.

Pinterest lost $63 million in 2018 on revenue of $755.9 million. That compared with a loss of $130.0 million on $473 million in 2017 revenue, according to the filing with Securities and Exchange Commission.

Launched in 2010, Pinterest brings in money from its role in online shopping and from advertising.

Pinterest attracts users who create virtual bulletin boards with pictures showcasing interests in anything from food to sports, fashion or travel.

The research firm eMarketer expects Pinterest’s global ad revenues to hit $1 billion this year, making up just 0.3 percent of the total digital ad spend.

In addition to making money from ads, Pinterest seeks to become a force in e-commerce by enabling users to click on images to purchase items they see.

Like several other startups, Pinterest will use a dual-class share structure that enables the founders, including chief executive Ben Silbermann, to retain control.

AFP

Senate Presidency: Groups Support Saraki With Prayers

senator bukola sarakiThe race for Senate leadership is getting more interesting as people from different groups and religious affiliations offer prayers to God, to ensure the victory and emergence of Dr Bukola Saraki as the next Senate President.

While the All Progressives Congress (APC) championed the cause, Dr Saraki has also said that he is hopeful of becoming the next Senate President.

The prayer session was started by the Kwara South chapter of the APC where representatives from seven local governments converged at Ajjase Ipo, the headquarters of Irepodun Local Government to seek the blessings of God for the emergence of Dr. Saraki as the President.

The State Chairman of the party, Ishola Balogun Fulani, noted that the Senator is qualified to hold the position, having served as the Chairman of the Governors Forum meritoriously.

He also appealed to the party leadership to zone the post to North Central and other Senators to support Saraki for the coveted post.

Pastor Bisi Oyewo, who led the Christians, expressed belief that Dr. Saraki has contributed immensely to the growth and success of the party and ought to be rewarded with the post of the Senate President.

While playing host to traditional rulers from Kwara Central which comprises of Magajis and Alanguas, the State Governor, Abdulfatah Ahmed, who spoke in Yoruba, urged the royal fathers to intensify their prayers for Saraki’s emergence as the President of the Senate.

Twitter Takes First Step Toward Going Public

Twitter Inc has filed for an initial public offering with U.S. regulators, the company said on Thursday, taking the first step toward what would be Silicon Valley’s most anticipated debut since Facebook Inc’s last year.

The impending IPO of the microblogging phenomenon ignited a competition among Wall Street’s biggest names for the prestige of managing its coming-out party. Goldman Sachs is lead underwriter, a source familiar with the matter said on Thursday, which is a major coup for the Wall Street bank.

Twitter filed for an IPO confidentially under a 2012 law intended to help emerging corporations with less than $1 billion in revenue go public.

Seven-year old Twitter, which allows users to send out streams of 140-character messages, has become an indispensable tool to governments, corporations and celebrities seeking to communicate with their audience, and for individuals seeking both news and entertainment.

Chief Executive Dick Costolo has for years waved off suggestions it intended to go public, saying the company remained flush with cash. Facebook’s mismanaged 2012 debut and subsequent share-price plunge also chilled the consumer-dotcom IPO market.

Facebook, however, has clawed its way back to its $38 IPO price in July, and the stock is at a record high after touching $45 this week.

Twitter, which has been valued by private investors at more than $10 billion, should break even this year and is on track for 40 percent annual growth at a $1 billion annual revenue run rate, Max Wolff of Greencrest Capital estimated.

“It’s completely conquered mobile. It has an enormous social network. It’s becoming a key utility as a second screen to TV and it’s literally the first draft of history,” Wolff said.

“Normally a company like Twitter would have been public for some time,” he said.

Since Jack Dorsey, Twitter’s inventor, dispatched the first tweet from a downtown San Francisco office in March 2006, the service has grown into a worldwide phenomenon with more than 200 million regular users contributing more than 400 million posts a day.

The company makes money by inserting paid, targeted ads that resemble ordinary, user-generated content. Twitter’s success with its advertising model created a new paradigm for mobile advertising and prompted Facebook last year to adopt a similar ad product, called Sponsored Stories.

But Twitter was one of the first to prove that in-stream ads could be a viable way to make money in the mobile era.

“There was a lot of concern about whether they’d ever be able to insert advertising into their site,” said Forrester analyst Nate Elliott. “They’ve shown it can be effective. They offer in many ways better measurement for marketers than larger companies like Facebook.”

JOSTLING FOR ROLES

Wall Street continues to jostle for a slice of its impending debut, sources told Reuters on Thursday.

Technology bankers at major banks from JPMorgan and Credit Suisse Group AG to Morgan Stanley are still vying for roles in the IPO. Several are in informal conversations with the microblogging network’s management, said two sources familiar with the matter who declined to be named because it is not public.

A similar race is on around China’s Alibaba, which is expected to raise more than $15 billion this year. Bank chief executives such as JPMorgan’s Jamie Dimon and Citigroup Inc’s Michael Corbat have made it a point to meet Alibaba founder Jack Ma.

Twitter’s debut, though much smaller than Facebook’s, could generate tens of millions of dollars in fees from the underwriting mandate itself. Assuming it sells around 10 percent of its shares, or $1 billion, underwriters could stand to divide a fee pool of $40 million to $50 million, assuming an overall fee cut of 4 percent to 5 percent, according to Freeman & Co.

But the benefits for banks that underwrite the deal would likely be far-reaching.

“Some companies will say, ‘We liked the way you handled Twitter, and we want to come to you first when we do our IPO,'” said David Menlow, president of IPOFinancial.com.

“It’s not only bragging rights,” Menlow said. “It’s getting through the front door, which will line up banks for other transactions done after that, like debt financings and M&A.”

Twitter is allowed to file its registration statement confidentially due to the Jumpstart Our Business Startups (JOBS) Act, a 2012 law that loosened some of the regulations surrounding the IPO process and other forms of capital raising.

Companies that file under that law do not have to reveal certain details until 21 days before embarking on an investor roadshow.

It could allow Twitter to avoid some of the harsh public scrutiny that other tech companies such as Groupon Inc faced.

Meanwhile, Silicon Valley boosters who were left red-faced by Facebook’s stumble are hoping that Facebook’s recovery and a smooth Twitter IPO would turn investor sentiment back toward consumer Internet companies.

“If 2012 was the Facebook IPO horror story, then all of a sudden 2013 is looking very nice,” said Rick Heitzmann, a venture capitalist at Firstmark Capital, which has invested in consumer Internet companies including Pinterest. “We’re now seeing that these are real companies proving they can drive very, very impressive revenue.”

Mobile world our biggest challenge – Mark Zuckerberg

Facebook CEO, Mark Zuckerberg confessed that the greatest challenge the social network is presently facing is its adaptation into the mobile world.

He opened up the discussion at the media conference of Allen & co. which took place at sun Valley in Idaho.

Fitting the 990 million fan base membership social network into al mobile devices is proving to be the toughest task presently hindering his job as there’s a difference between desktop and mobile platforms. He also delved into the workability of the social network

Since the company went public in mid-May, Facebook has been having a tough time, and it still hasn’t climbed back to its $38 IPO price. Facebook’s stock fell below $$26 at one point and since then it’s generally stayed around the $30 mark.

The company’s struggles in the mobile realm has been well documented since Facebook filed documents with the SEC as it prepared to go public and listed mobile as one of its obstacles.

After that time, though, the company has made efforts to improve in the area. Facebook has made purchasing mobile ads easier, released a duo of apps this summer and purchased Instagram for $1 billion in April.

Meanwhile, for Facebook rival Twitter, the story is precisely the opposite as the company has actually been making more money from mobile on some days.

CEO; David Costolo admitted that he’s been all smiles to the bank these days.