Back in 2014, Alibaba Group, the massive Chinese e-commerce, retail, Internet, and technology company, raised $25 billion in its record-shattering initial public offering (including the option to sell more shares that underwriters exercised a few days after the original IPO). Prior to that, the largest IPO was the 2010 public debut of Agricultural Bank of China Ltd., at $22.1 billion. Agricultural Bank of China also increased its IPO size a bit after-the-fact in a fashion similar to Alibaba. One has to skip over another massive Chinese bank to get to the largest IPO ever from a U.S. firm: the iconic General Motors emerged from its bankruptcy filing with a spectacular $20.1 billion IPO in November of 2010. As I write this, General Motors has the fourth largest IPO in history.
Very soon though (probably the day this article is published, according to unnamed Reuters sources), the General Motors IPO will be knocked into fifth place. Shares in the massive, state-owned oil giant Saudi Aramco will be available to investors for the first time. An Aramco statement says that the company is pricing its IPO at 32 riyals, or $8.53, per share, which would raise $25.6 billion. In addition to giving Aramco the largest IPO ever, that level would put Aramco’s total market valuation at $1.7 trillion, making it by far the world’s most valuable publicly listed company. Sorry, Apple Inc.
Now, I’m no babe in the woods when it comes to the moral ambiguities of investing in the 21st century. An enormous Chinese tech and Internet company, grossly swollen foreign banking institutions, and even an American-as-apple-pie/too-big-to-fail automaker are hardly philanthropic endeavors. Teasing out the ethical implications of investing in the simplest of 21st century index funds would give Aristotle a headache, if not an aneurysm. Still, an oil company, and one which will remain mostly owned by an absolute monarchy that just started to let women drive and carves up journalists like so much Christmastime goose…doesn’t an investor have to draw the line somewhere?
I’m not going to go through every morally questionable thing that Saudi Arabia and Saudi nationals have done recently. Among other reasons, I try to keep this column to around 700 words per week. But, as someone who considers himself at least a third-rate journalist and is writing something unfavorable to Saudi Arabia right now, I suppose I’d be a coward if I didn’t briefly bring up Jamal Khashoggi. You all know the story at this point: Khashoggi went to his appointment at the Saudi consulate in Istanbul to get documents he needed for his pending marriage, and was almost immediately set upon and dismembered by 15 state-sponsored Saudi murderers. For the crime of criticizing Saudi Arabia and the leadership of its crown prince Mohammed bin Salman, to try to help the country become a better place for its people, Khashoggi was executed and his body desecrated. He was killed for doing his job as a journalist. What a bunch of bullshit.
One could say that, as troubling as many of his decisions are, at least some things have improved in Saudi Arabia under the rule of MbS. One could even justify participating in the Aramco IPO on the basis that its stated purposes include bringing in foreign investment, ultimately diversifying the economy of Saudi Arabia away from oil, and driving job growth in a country that desperately needs it. Opening up Saudi Arabia’s economy to make it less of a one-dimensional petrostate could only increase the level of freedom its people enjoy. But sometimes you need to require some real, dramatic improvement, a demonstrated willingness to change, before you volunteer to help someone stop being a train wreck.
So far, most major active fund managers are indeed steering clear of the Aramco IPO, “citing persistent concerns about risks around governance, the environment and regional geopolitics,” according to Reuters. That’s just a more diplomatic way of saying what I’m saying: Saudi Arabia, and by extension Aramco, both suck, and they need to get a lot better before we should voluntarily entrust them with (even more of) our hard-earned money.
In a year or two, given the sheer size of the IPO, those of us who invest in index funds probably aren’t going to have any choice but to own a little bit of Saudi Aramco. For now, however, maybe we should do our best to speak in the international language of money to tell Aramco we’re not cool with Saudi Arabia’s bullshit no matter how high the dividend is.
And in the name of all the pagan Yuletide gods, if I disappear into a consulate somewhere, please call someone.
Jonathan Wolf is a litigation associate at a midsize, full-service Minnesota firm. He also teaches as an adjunct writing professor at Mitchell Hamline School of Law, has written for a wide variety of publications, and makes it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.