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Saudi Stock Market Prepares New Rules For Aramco Listing

New financial market rules aimed at preventing major price drops in newly listed companies on Saudi Arabia’s Tadawul exchange will be ready by the end of this June, in anticipation of what is touted to be the largest IPO in history, of Aramco.

The head of the Saudi Capital Market Authority told Reuters it will issue price stabilization guidelines ahead of Aramco’s listing and after that “we can then say that the Saudi market will be fully amenable to accommodate an offering of the size of Saudi Aramco, or indeed of any size,” Mohammed El Kuwaiz said.

The price stabilization mechanism protecting newly issued stocks from dropping suddenly involves underwriters of the IPO buying some of the company’s shares as a means to boost its price. The mechanism also kicks in if trade in the newly listed company’s stock is much weaker than expected.

Clouds have been gathering over Aramco’s listing almost from the start.

In addition to investor skepticism towards investing in one of the least transparent oil companies in the world, there have been problems with picking the location for the international listing of the company.

London, New York, Tokyo, and Hong Kong are all on the short list but the chances of a listing taking place in New York this week dropped sharply after a federal judge ruled in favor of lawsuits against Saudi Arabia for its alleged involvement in the 9/11 attacks.

In addition to the choice of venue there is the issue of whether there will even be an international listing. The latest official comments are that it will be delayed, along with the primary listing on Tadawul, which was supposed to take place in the second half of this year but has been postponed for 2019.

CMA will later this year start working on rules for dual listings on Tadawul and another exchange—also part of the preparations around Aramco’s IPO. These should be ready by early 2019, El Kuwaiz said.

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By Irina Slav for Oilprice.com

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