of Saudi Arabia, revealed a plan to list the shares of state oil

company Saudi Aramco.

This was big news, given the country

controls the second-largest crude oil

reserves in the world.

The idea was to raise money by selling

5 per cent of this company to investors in order to bolster

the country's finances.

Now, back then, the oil price traded at half today's $62

per barrel price.

No surprise that Saudi Arabia wanted as high a valuation as

possible.

Unfortunately, the kingdom's valuation expectations

for Saudi Aramco were just too high.

The crown prince, known as MBS, thought

$2tn was the right amount well before any banking advisers had

been hired.

Lex, after doing some financial modelling back in 2017,

now thinks the valuation should be closer to $1.2tn.

Most other analysts also believe the Saudi valuation

to be pricey, including their own global advisers

for the IPO.

That did not stop bankers from organising roadshows

to promote Saudi Aramco.

These meetings do not appear to have gone very well.

While recent bond offerings for Saudi Aramco have gone well,

issuing shares turned out to be much trickier.

International equity fund managers clearly

did not like what they heard, and banks insisted they listen.

But the listing would only be on the Saudi stock exchange,

one for which not many foreign investors have any experience.

Aramco would be, far and away, the largest company

on that exchange.

Portfolio managers also worried about the security

of the company's oil facilities.

Saudi Aramco suffered an attack in September of this year.

Later, the company offered a substantial dividend,

which could grow over time.

But pestering fund managers to take up an IPO only puts them

off, as they will fear no one else wants to buy.

And that is what happened.

In the end, the final price was lower and the sale portion less

than MBS had originally desired.

Still, nothing enticed international investors -

outside the Gulf, at least - to put in big orders.

For now, most of the shares sale at a high valuation -

closer to $1.7tn - will go to investors in Saudi Arabia

and the Gulf, not at all what was originally intended.