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Saudi Arabia’s state energy giant Aramco has been made a joint stock company in preparation for its initial public offering, planned to take place in the second half of this year. The company has a fully paid capital of US$16 billion (60 billion riyals) divided into 200 billion ordinary shares, and a board of eleven directors who will be in charge of the company’s listing.
The Saudi government will be responsible for proposing six of the eleven board members, and any shareholder with a stake of over 0.1 percent will be entitled to propose one candidate for member of the board.
Riyadh plans to list 5 percent of Aramco, hoping to pocket as much as US$100 billion, which would value the company at US$2 trillion. However, there have been doubts that the world’s largest oil company in terms of reserves is worth so much.
There have also been issues with the location of the listing. The short list includes the stock exchanges of London, Hong Kong, Tokyo, and the NYSE. However, the last one is unlikely to be picked because of litigation risks after Congress passed a post-9/11 law allowing U.S. citizens to sue Saudi citizens, and concerns over how the OPEC production cut deal could be construed as price fixing, which is illegal in the United States.
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The LSE has been widely considered a favorite for the floating, with the British government and the Financial Services Authority—Britain’s financial markets watchdog—both working hard to win the hearts of the Saudis. However, these effort on the behalf of the FCA, backfired when it was revealed the regulatory authority was considering changing its listing rules especially for Aramco.
This raised vocal opposition from within the financial market circles, with insiders arguing that a change in the rules to accommodate Aramco’s listing would compromise the soundness of corporate governance practices the city is famed for.
This opposition led to a parliamentary probe into FCA’s intentions to allow companies majority-owned by a sovereign state to be eligible for a premium listing on the LSE. Earlier this week it emerged the FCA has decided to postpone its decision on the listing rule change. Meanwhile, Riyadh has repeatedly said that the IPO is on track and all listing venues are still being considered.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.