Aug 11, 2017

Saudi oil giant leans to New York for IPO

Hasan Jamali / AP

Saudi Arabia is leaning towards New York as the principal venue for the IPO of state-owned oil giant Saudi Aramco, according to a detailed account in Reuters and a person familiar with talks in Riyadh.

The Saudi government plans to sell 5% of the company in an offering tentatively slated for 2018, and use the proceeds to help diversify its oil-dependent economy. London's stock exchange has also been heavily courting Saudi officials.

Why it matters: the IPO is likely to be the largest offering ever. The final decision rests with Crown Prince Mohammad bin Salman. It has geopolitical ramifications, as the first attempt of one of the large Persian Gulf petro-states to right their fiscal ships by shifting their economies into technology and other sectors.

Kingdom officials say the company is worth $2 trillion, and while it will probably be worth less — perhaps substantially less — the IPO will generate huge fees for the principal listing exchange.

Having the IPO in New York may be seen as a win for the Trump administration.

Behind the scenes: Reuters reports that New York is favored even though some of the kingdom's financial and legal advisers say it has some disadvantages compared to London.

  • "Prince Mohammad may choose to list Aramco on the New York Stock Exchange (NYSE) for 'political considerations', given the longstanding relationship between Riyadh and Washington, the sources said. However, they added that financial and commercial factors would also play a role in the choice," they report.

A source familiar with the talks in the Saudi capital tells Axios that, in essence, the lawyers oppose New York and bankers prefer it, and the bankers have the upper hand right now.

U.S. securities laws require more transparency and disclosure than does the UK, an important consideration given Saudi's intense secrecy. Another factor is litigation risk, including potential complications from the 2016 law passed over then-President Obama's veto that seeks to allow lawsuits against Saudi Arabia involving 9/11.

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