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UK’s Volatile Political Environment Could See London Lose Out On Biggest IPO Of All Time

written by Bella Palmer

Much of the population of the UK is already disappointed by the political infighting and destructive apparent refusal of the country’s main political parties to look for a common ground compromise that would get us through Brexit without having to resort to extremes. And the new era of political instability that state of affairs has led to is also not going unnoticed internationally. Unfortunately, it is being reported today that one consequence of Britain’s reputation for reliably political stability being tarnished could be London losing out on the biggest IPO of all time.

Saudi Arabia’s on-off plans to float shares in Aramco, the state oil company that is by far the biggest in the world, are currently back on again. While not without fierce competition, London has always been considered the favourite to win what would be expected to be a $2 trillion listing.

The FCA even last year changed listing rules to create a new category that would ease the process of Aramco listing on the LSE. David Schwimmer, the one who is CEO of the London Stock Exchange rather than the Friends actor, also personally flew out to Saudi Arabia to woo decision makers including crown prince Mohammed bin Salman. The crown prince has been the driving force behind the proposed IPO, which is central to his plans to modernise and diversify the Saudi economy.

But reports in yesterday’s edition of The Wall Street Journal suggest that Saudi Arabia is currently leaning more towards the Tokyo stock exchange, put off by the perception political instability has gripped the UK.

Saudi Aramco is the most profitable company in the world. Its exclusive rights to the 250 billion or so barrels of oil and gas reserves held by Saudi Arabia saw it record $111 billion in net revenues over 2018. Its profits exceed those of the six publically listed international oil majors combined.

Not everyone would be disappointed should Aramco take its business elsewhere. The London Stock Exchange and British government have faced criticism from some quarters for what is seen as bending over backwards to secure the listing, softening usual compliance standards. All to win favour from a regime with what many consider to be an ‘appalling’ human rights record.

However, with no decision yet made and Saudi Arabia’s decision makers, particularly the crown prince, notoriously fickle and prone to changes of sentiment, the current favour in which Japan is being held could change and London be back in the running. If real progress towards the Aramco IPO is finally made this year, it is expected that an initial listing will be made on Saudi Arabia’s domestic stock exchange before an international listing in either 2020 or 2021.


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