Trump backs Saudi Aramco's IPO listing on NYSE

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US President Donald Trump, who arrived in Japan on Sunday, said he spoke with the King of Saudi Arabia about listing national oil company Saudi Aramco’s shares in New York and that “they will consider using US exchanges.”

The remarks were made aboard Air Force One en route to Japan, where Trump kicks off a 12-day Asian trip.

Trump has publicly appealed on Saturday for Saudi Arabia to list national oil company Saudi Aramco’s shares in New York, intervening in a battle among the world’s top stock exchanges.

'Important to the United States!'

“Would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange (NYSE),” Trump wrote on Twitter. “Important to the United States!”

Trump did not say why he raised the issue at this time or whether he was responding to any information about the NYSE’s bid. But by describing the listing as a priority for Washington, he could help sway the Saudis’ decision.

A screenshot of Trump's tweet.

The Saudi government, seeking to raise money as low oil prices strain its finances, plans to sell about five percent of Aramco next year in a sale officials say could raise about 100 billion US dollars, making it the world’s largest initial public offer ever.

Saudi authorities have said they intend to list Aramco in Riyadh and on one or more foreign exchanges, setting off a competition among New York, London, Hong Kong, Tokyo and other bourses.

An Aramco spokesman had no comment on Trump’s tweet, while a spokeswoman for the NYSE declined to comment.

NYSE Group president Thomas Farley said at a conference in Riyadh last week that he had not given up on the IPO and was in talks with Saudi authorities.

The London Stock Exchange has also received some government support for its bid, although that has been less public. British Prime Minister Theresa May and the chief of the LSE pitched investments in Britain to the head of Saudi Arabia’s sovereign wealth fund on a visit to Riyadh earlier this year.

While Trump’s tweet named the New York Stock Exchange, it did not mention rival Nasdaq Inc, which is also vying for the Aramco listing.

“Generally, public servants should be impartial, not give preferential treatment to anyone, and avoid endorsements,” said Scott Amey, general counsel for the government ethics watchdog Project on Government Oversight in Washington. “We have already seen violations in this administration, and it doesn’t help that the president isn’t leading by example.”

Nasdaq replied to Trump in a tweet, saying it agreed the United States was the “best destination for global companies” but that Aramco belongs on Nasdaq “with the five most valuable operating companies in the world.”

Exchanges hosting Aramco can look forward to a boost in fee income from trading the stock. The prestige associated with the company may help them attract more big listings, including IPOs of other state companies from the Gulf as governments there sell assets in an era of cheap oil.

Awaiting a decision

Nearly two years after announcing their plan to sell Aramco shares, Saudi officials say they have not yet decided on foreign listing venues.

Sources told Reuters in August that Riyadh favored New York for Aramco’s main foreign listing. But some financial and legal advisers have recommended London as a less problematic and risky option.

Saudi Energy and Oil Minister Khalid Al-Falih arrives to attend the Future Investment Initiative (FII) conference in Riyadh, on October 24, 2017. /VCG Photo

Aramco’s lawyers warned about litigation risks associated with the US Justice Against Sponsors of Terrorism Act, or JASTA. Passed last year, the law allows the Saudi government to be sued on the grounds that it helped to plan the September 11, 2001, attacks on the United States, an allegation which Riyadh denies.

Mohammed al-Sabban, who has been an adviser to former Saudi oil minister Ali al-Naimi, told Reuters that Trump’s intervention would not resolve the JASTA problem.

“President Trump has forgotten completely that the risks of implementing the JASTA law against Saudi assets are still there,” Sabban said.

China eyes stakes in Aramco: Report

Earlier in mid-October, Reuters exclusively reported that China is offering to buy up to five percent of Saudi Aramco directly, a move that could give Saudi Arabia the flexibility to consider various options for its plan to float the world’s biggest oil producer on the stock market.

Chinese state-owned oil companies PetroChina and Sinopec have written to Saudi Aramco in recent weeks to express an interest in a direct deal, industry sources told Reuters. The companies are part of a state-run consortium including China’s sovereign wealth fund, the sources say.

Saudi Aramco logo /Reuters photo‍

PetroChina and Sinopec declined to comment.

China is creating a consortium made up of state-owned oil firms, banks and its sovereign wealth fund to act as a cornerstone investor in the IPO, people with knowledge of the discussions told Reuters in April.

The initial public offering (IPO) of Saudi Aramco is the centerpiece of an economic reform plan to diversify the Saudi economy beyond oil and it would also provide a welcome boost to the kingdom’s budget which has been hit by low oil prices.

With the fast economic development in China over the last three decades, China has become a much more important energy partner to Saudi Arabia and Gulf states.

Source(s): Reuters