World’s top stock markets in race to bag Saudi Aramco IPO
Saudi Arabia is preparing to sell about 5 percent of the world’s largest oil company, Saudi Arabian Oil Co. (Saudi Aramco), and wants at least one exchange other than its own Tadawul for the initial public offering (IPO) that is estimated to raise as much as $100 billion.
Stock exchanges in New York, London, Tokyo, Singapore, and Hong Kong have since stepped up efforts to secure what expected to be the world’s largest listing. Argaam takes a look those in the running.
The New York Stock Exchange is said to have all that Aramco would look for – the global investors, experience and liquidity required to lead an IPO of that size. Executives from the exchange have held discussions with Aramco officials and the kingdom is said to be leaning towards New York as the international destination for the listing.
“Initially, NYSE was one of the favorites for listing but this now seems to have been put on the sideline, as many political, regulatory and legal challenges have presented themselves,” Racha Al Khawaja, head of institutional coverage at Almena Financial Brokers, told Argaam.
Nasdaq, meanwhile, has also put forth its bid highlighting its relationship with Tadawul as a technology partner.
The London Stock Exchange (LSE), too, has the lucrative combination of healthy investor exposure, experience and liquidity, analysts said. UK Prime Minister Theresa May pitchedthe London bourse as the international host for the Aramco listing during her visit this week.
“LSE has historically been seen as a favorite for global depository receipts (GDR) and has witnessed other listings from the region… If the challenges on NYSE remain unresolved, LSE will be the favorite by process of elimination,” Khawaja said.
Nitin Garg, manager (research) at investment firm SICO, believes UK could push hard to convince Saudi Aramco to pick London “to promote Britain as a financial center after Brexit.”
During his visit to Japan last month, Saudi Arabia’s King Salman had said he would consider Japan’s request to list Aramco’s shares on Tokyo exchange. Saudi Aramco and TSE are also looking to set up a joint group to study a potential listing of the oil giant in Japan.
“Currency risk is one of the major issues that will emerge with a listing in Japan,” Khawaja said about the Asian exchange.
Hong Kong, Singapore, and Toronto have also expressed interest in hosting the IPO. Chinese officials last year pitched a dual listing for Aramco on the Hong Kong and Saudi exchanges, in return for anchor investments from Chinese funds.
Soon after Aramco announced its IPO plans, reports suggested that the oil firm could look at a three-way foreign listing in London, New York, and Hong Kong. In February, Saudi energy minister Khalid Al-Falih said that the kingdom was studying the option of listing Aramco shares in several equity markets simultaneously.
Khawaja, however, expects Aramco to opt for only one.
“In order to ensure that liquidity is high on any international listing, Aramco may opt for listing on one international exchange only,” she said.
Garg, on the other hand, said given the size of the IPO, multiple listing is likely the only practical way of going forward.