Saudi Aramco: to float or not to float?

For the past year, “every banker and lawyer in town has been jostling for a piece” of the mooted $2trn flotation of the state-owned oil giant Saudi Aramco, said Simon Duke in The Sunday Times. Yet the biggest float in history is now “hanging by a thread”, amid a growing row that has dragged in everyone from the Prime Minister to the senior City watchdog, Andrew Bailey. And now the Saudis are reportedly getting cold feet. According to the Financial Times, Riyadh is considering “shelving” the international listing in favour of “a private share sale” to foreign governments, including China.

One can see why Theresa May is keen to woo Aramco, said Russell Lynch in the London Evening Standard. It would be “a huge coup for post-brexit London”, which has been “vying with New York” for the business. But the charge tabled by critical MPS and big City investors is that No. 10 has been leaning on Bailey’s Financial Conduct Authority (FCA) “to water down the listing rules” to accommodate the Saudis – potentially harming other investors. At issue is the fact that the Saudis want to float just 5% of Aramco – far short of the 25% currently required for a “premium” listing. The FCA has suggested a compromise “reform”, insisting this isn’t a special favour. Yet the watchdog met Aramco executives several times shortly before announcing the measure.

“Andrew Bailey’s fig leaf is dangling a little precariously,” said Patrick Hosking in The Times. Time to rip it off. This float would make “a mockery of the FCA’S key objectives of nurturing market integrity and protecting investors”. The Saudis, who are concerned about legal risks arising from a New York listing, say that Aramco’s listing remains “on track”. Given rising tensions in London, it looks anything but.