Daily Management Review

Aramco IPO Could Be A Long Way Away From The New York Stock Exchange


03/24/2017




Aramco IPO Could Be A Long Way Away From The New York Stock Exchange
For the global IPO of Saudi Aramco — widely predicted to be the biggest initial public offering in history, the New York Stock Exchange has emerged as the front-runner. But Riyadh could be discouraged from pursuing a U.S. listing, despite the commercial merits by political, regulatory and legal challenges.
  
After the Kingdom announced a $200 billion investment program during deputy crown prince Mohammed bin Salman's visit to Washington earlier this month the Trump administration appears to have reset relations with Saudi Arabia,  at least on the surface.
 
But standing in the way could be political perceptions, stringent U.S. disclosure rules and 2016 legislation allowing 9/11 victims to sue Saudi Arabia even though Riyadh called the meeting a “historical turning point” in U.S.-Saudi relations.
 
When contacted by the media, the New York Stock Exchange declined to comment.
 
Robin Mills, CEO of Qamar Energy and a former Shell executive said that a NYSE listing would be "too legally and politically risky." London, Saudi Arabia's Tadawul stock market and possibly an Asian exchange would most likely be involved for a global Aramco listing,, he added
 
"They (Aramco) seem to be creating a beauty parade and talking to everyone," said Fereidun Fesharaki, founder and chairman, of Facts Global Energy. "New York is absolutely out due to regulatory restrictions. It is not a maybe, it is definite."
  
Opening up its books to regulators — and ultimately to greater investor scrutiny is the result of an international stock market listing. None of the Saudi state owned companies are accustomed to sharing information about financial accounts and oil reserves and that would be a first for any Saudi state-owned behemoth. Despite plans to float only 5 percent of Aramco, doubts about whether Riyadh would be prepared to meet such transparency demands, are being raised by some.
 
"The Aramco IPO is a great PR stunt," said Gal Luft, co-director of the Institute for the Analysis of Global Security, a Washington-based think tank focused on energy security.
 
"How can one establish a valuation for a company that has thus far kept its reserve data a state secret? Tearing a 5 percent piece of the company and throwing it into the market while the other 95 percent is a black box will not fly with prudent investors."
 
In a process that's expected to be completed by the end of the year, international auditors have been appointed to independently assess its massive oil reserves, by Aramco. The choice of where the listing takes place and a direct impact on the all-important valuation could be had by the result of that audit — and whether it undershoots or overshoots the official Saudi figure of over 261 billion barrels.
 
A U.S. Securities and Exchange Commission audit also has to be passed by firms that list in New York. one former investment banker said that a key issue for Saudi Aramco's New York considerations "is having to reconcile to its extensive reporting and disclosure requirements."
 
Additionally, standing  to complicate the picture further is the continued political and diplomatic fallout from the Sept. 11, 2001 attacks.
 
Longstanding suspicions that elements linked to Riyadh backed the hijackers who attacked the U.S. in 2001 have been denied by Riyadh. Fifteen of the 19 hijackers were Saudi nationals.
 
(Source:www.cnbc.com) 






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