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Saudi Aramco floating shares, but it’s not sure where

MarketWatch, news published by Dow Jones & Co., which tracks the pulse of investment markets, said a few days ago that Saudi was leaning towards not listing Aramco in any major foreign exchange and towards cancelling an IPO in favour of investor’s interest in the state-owned oil company.

It based this assumption on multiple news reports, including the Financial Times (FT), which cited sources close to the company as saying that these new options were gaining steam.

Read: Bloomberg: Saudi Aramco needs $60-$70 oil for IPO

Sale will proceed

What has not changed is the plan to sell 5% of the company, valued at $2 trillion, thus earn $100bn in revenues, which would then be reinvested in the Saudi Public Investment Fund (PIF), which owns the rights of Aramco’s shares.

The Wall Street Journal reported this year that the company had long been planning the IPO for 2018, with New York and London markets as prime targets, but that a listing on Riyadh’s Tadawul Stock Exchange in 2019 was part of the thinking as well, though Tadawul does not have the level of sophistication for such large transaction.

FT later confirmed Aramco as saying on Twitter: “All listing venues under review for optimal decision, IPO process is on track for 2018.”

Read: Saudi Aramco pays premium in debut sukuk sale

Hiccups with UK and U.S. listings

Discussions in the UK, as reported by local media, have focused on corporate governance rules that would need to be changed to accommodate the sale.

London’s listing rules say that more than 25 per cent of a company’s shares should be listed, ensuring that there is enough liquidity for investors to buy shares.

FT said that Saudi was not too keen on the U.S. markets, worried about legal risks related to legislation on terrorism, which give Americans the right to sue the oil-rich country.

Big deal

The Aramco IPO is an essential part of Saudi Vision 2030, towards a diversification away from oil.

Reuters in May reported that Saudi Crown Prince Mohammed Bin Salman said that the government would not be relinquishing control of Aramco’s oil and gas reserves, and would keep decisions on production levels or cashing on the oil reserves as sovereign issues, not the realm of the private sector.

“The Saudi government will decide on the production ceiling. It is in the interest of the Saudi government to increase the production not reducing it,” Prince Mohammed was quoted as saying.

“The government will not take a decision that goes against its interest or the interest of the company regarding the production.”

Reuters reported that proceeds from the Aramco sale would be reinvested by the  PIF, “which will spend more than 500 billion Riyals ($133.3 billion) over three years after Aramco’s IPO,” quoting the crown prince again.

Read: Saudi Arabia sweetens huge Aramco IPO with tax cut