World’s Richest IPO Pits London Against New York
Saudi Arabia aims to sell about 5% of Saudi Aramco in an initial public offering (IPO) next year, and stock exchanges from the UK to Japan are vying for what may be the world’s richest IPO. The Saudi c r o wn p r i n c e , Mohammed bin Salman, will soon decide where to sell the company’s shares after government officials heard a presentation on the listing process last week, according to people with knowledge of the matter. The kingdom plans to list on the Saudi stock exchange in Riyadh and sell shares on at least one bourse outside the country. That choice pits the top global financial centers, London and New York, against each other for a sale that could value the largest oil exporter at as much as $2 trillion. The Saudis and their advisers want to pick a foreign exchange or exchanges with similar listing and regulatory requirements to the Riyadh bourse, to avoid large deviations in pricing between the markets, according to other people familiar with the situation. Here’s a rundown of some pros and cons for Saudi Arabian Oil Co., as the company is formally known, in choosing to list in London, New York, Hong Kong, Tokyo, Singapore or Toronto — the six main contenders for the prize.
London improved its chances when regulators overseeing the London Stock Exchange proposed rule changes last month that would make it easier for governments to list their state-backed entities, according to the people with knowledge of the plans to decide soon on Aramco’s listing. The changes would allow Aramco’s shares to trade on the LSE’s premium segment, with access to a wider pool of investors than a standard listing.
The proposals would also eliminate a requirement that sovereigncontrolled companies list at least 25% of their shares to be eligible for the premium segment. That’s a big concession to the Saudis, who have said they plan to sell about 5% of the company.
However, the Institute of Directors, a leading UK business group, opposes the changes as unjustified, saying the proposals mustn’t diminish London’s reputation for corporate governance. The institute urged the Financial Conduct Authority to reconsider the proposals, its director general said in an emailed statement. The IPO would give a welcome boost to London’s reputation as a financial center, given the UK’s plans to leave the European Union. But for Aramco, Brexit could tar nish London’s appeal by reducing the number of potential buyers of the company’s shares.
New York’s appeal to the Saudis as the financial hub of the world’s largest economy is enhanced by the relationship Prince Mohammed has cultivated with US President Donald Trump. Aramco has been one of three biggest crude suppliers to the US over the last four decades. The company also owns the largest US refinery, a plant in Port Arthur, Texas, through its wholly owned s u b s i d i a r y Mo t i v a Enterprises LLC.
One risk to an Aramco listing in New York is a US law allowing victims of terrorism to sue foreign governments linked to attacks. Fifteen of the 19 hijackers who carried out the September 11, 2001, attacks in the US were Saudi citizens, and advisers to the company say that American officials have provided little assurance that Aramco wouldn’t be a target of litigation, according to the people with knowledge of the situation.
Aramco is also evaluating a risk of broader litigation in the US that could emerge, for example, with shareholders lawsuits targeting the company over environmental concerns, according to the people familiar with how the Saudis and their advisers are assessing the listing options.