Saudi Arabia considers dual stock listing for Aramco

Saudi Arabia is considering a dual listing as a way to reach investors beyond the local stock market for the sale of shares in state-owned oil giant Aramco, which could be the world’s largest initial public offering, the kingdom’s deputy crown prince said.

“We are thinking about several options,” Prince Mohammed bin Salman, who heads Saudi Arabian Oil Company’s supreme council, said in an interview last week at King Salman’s private farm in Diriyah, the original home of the Al Saud royal family. “Either it will be double listed or maybe we can have a fund in the US market that can only trade and invest in Saudi Aramco, like some of the funds that are already out there that trade in gold or oil,” he said, without giving further details.

Prince Mohammed is leading the planning for the sale of less than 5 per cent in Aramco, which is targeted for 2017-2018. It could raise as much as $106 billion, according to the Sovereign Wealth Fund Institute, making the company the largest publicly traded one in the world, with a market capitalisation over $2 trillion. Even a small stake would dominate the tightly regulated Saudi stock market, the Tadawul, which has a capitalisation of $398bn.

“If speculation of the size of the deal is correct, they will have to look for liquidity outside the Kingdom,” James Bannan, who manages $170 million in frontier markets at Coeli Asset Management, said by email from Malmo, Sweden. “Some structure in the US or London makes sense,” he added. 

The Tadawul All-Share Index is down more than 30 per cent over the past year.

Chinese officials early this year pitched a dual listing to Saudi officials that would put Aramco’s shares on both the Hong Kong and Saudi exchanges in return for anchor investments from Chinese funds, people familiar with the matter told Bloomberg in February. There’s been no word yet of any Saudi reaction to the offer.

The Aramco placement could dwarf the $25 billion public offering in 2014 by Alibaba Group, the world’s largest, and Facebook’s $16bn share sale. But it’s difficult to determine how much foreign investors would be willing to pay since Aramco has never published financial information. Many state-run oil companies trade at substantial discounts to their private-sector competitors.

“They need to treat the IPO, even if done locally, as if it’s a dual listing in terms of transparency and governance,” said John Sfakianakis, the Riyadh-based director of economics research at the Gulf Research Center, a think tank. “A level playing field for all has to be there from the start.”

In the Saudi market, foreign participation remains restricted. Since it was opened to some direct foreign investment in June, less than a dozen overseas investors have received licenses to trade in the market.

“If the listing is on the Saudi stock exchange alone, there will always be question marks on transparency, question marks on who will be able to invest in terms of foreign investors,” said Ghanem Nuseibeh, founder of London-based consulting firm Cornerstone Global Associates. “A dual listing or listing in a foreign jurisdiction will give a greater degree of confidence, particularly when it comes to foreign investors. But then again, that will come at a price in what the government is prepared to disclose in terms of Aramco,” he added.

The kingdom chose JPMorgan Chase & Co and Michael Klein, the former Citigroup investment banker who runs his own boutique, to advise on the Aramco offering, people familiar with the matter said this week.

The sale is a key part of his broader plan to reduce the country’s dependence on oil.

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