DUBAI: The US President Donald Trump has urged Saudi Arabia to choose the New York Stock Exchange (NYSE) for its record-breaking initial public offering (IPO) of Saudi Aramco planned for the end of next year.
The president took to Twitter to ask the Kingdom to select NYSE, the world’s biggest stock market, for the Aramco offering, which would be by far the biggest share flotation in history.
“Would very much appreciate Saudi Arabia doing their IPO of Aramco on the New York Stock Exchange. Important to the United States!,” he tweeted.
Would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange. Important to the United States!
— Donald J. Trump (@realDonaldTrump) November 4, 2017
Aramco’s IPO could be worth $100 billion if it proceeds with a 5 percent offering, four times the value of the current record IPO, the 2014 offering of Chinese e-commerce company Alibaba, which also took place on the NYSE.
The surprise intervention by the president — who has never spoken publicly about the Aramco IPO — could tilt the odds back in favor of New York in the contest to stage the offering. In recent weeks, there have been reports that Aramco was considering a sale of shares to Asian investors in a private deal as part of what the company called “a range of options.”
There has also been increasing opposition in London — home to the other big international exchange vying for the deal — to staging the IPO due to perceived concerns over what some view as “rule bending” to accommodate the offering.
At last month’s Future Investment Initiative (FII) in Riyadh, Saudi Arabia’s stock exchange the Tadawul made its own bid to stage the IPO “exclusively” in the Kingdom, and was backed by the regulator, the Capital Market Authority.
Trump’s tweet — which came as he prepared for an 11-day visit to Asian countries — apparently caught Aramco and NYSE by surprise. Spokespeople for both Aramco and the NYSE declined to comment.
However, one person close to the situation said: “Who knows what messages were passed at the FII? There were top NYSE people there and top US government people. Maybe somebody has brought it to the president’s attention after that.”
At the FII event in Riyadh, Thomas Farley, president of the NYSE, was asked whether he had given up on hopes of staging the Aramco IPO.
“No, and I am not saying anything else,” he responded. It was later reported that he had talked to Saudi authorities about the IPO while in Riyadh.
American experts said the president’s tweet was positive for NYSE’s chances of landing the IPO. Jim Krane, fellow in energy studies at Rice University’s Baker Institute in Houston, Texas, said: “(Trump) is throwing down the gauntlet to London and other cities that are vying against his home town. He wants to bring home the big prize for New York.”
Ellen Wald, lecturer in Middle East history at Jacksonville University in Florida and author of forthcoming book “Saudi, Inc.,” said, “I think it’s a good sign for Aramco, a sign that Trump feels strongly and good about Saudi-US relations, especially economic relations, and thinks it would be good for the US economy.”
New York was seen as the favorite for the IPO after the president’s visit to the Kingdom in May, when business deals worth billions of dollars were struck between the US and Saudi Arabia.
Most of the investment banking advisers to Aramco on the IPO are from American financial institutions, and they and other advisers are expected to earn tens of millions of dollars in fees on the transaction.
However, some advisers have warned that a listing in the US could expose Aramco to litigation under the American Justice Against Sponsors of Terrorism Act (JASTA), as well as punitive US climate change laws. Krane said: “By inserting himself into the negotiating process, Trump has given the Saudis and Aramco a stronger hand in arguing that they should not be subject to JASTA actions. It is a signal from the president that the USA is prepared to be flexible on anti-terrorism funding laws.”
But Wald, who is also a non-resident scholar at the Arabia Foundation, said: “It’s just a tweet. It doesn’t necessarily mean any policy changes or special treatment for Aramco.”
“It is also a message to China because he’s in Asia. It’s his way of saying to the Chinese, ‘well this is important to you? We’re going to fight for it too.’ But in any case there is no negative for Aramco. It’s also Trump’s way of defining the media narrative for the day.”