Saudi Aramco IPO: NYSE listing faces challenges even with Trump push

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(Copyright 2016 The Associated Press.)

Just hours prior to an overnight anti-corruption sweep in Saudi Arabia, President Donald Trump suggested that the Kingdom should list Saudi Aramco on the New York Stock Exchange; a move that may be in the best interest of the United States, but a real challenge for Saudi Arabia.

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“It is said that the Crown Prince, who seems to be crucial to [the whole IPO], wanted to do it in New York,” David Ottaway, a Middle East fellow at the Wilson Center, told FOX Business last month. “New York is not great for them in the future, legally, because of the legislation that now allows the 9/11 victim families to sue the Saudis in court.”

That legislation, passed in 2016, has sparked some fears that a U.S. listing could open up the Kingdom to lawsuits related to the 9/11 terror attacks. However, in addition to potential litigation, there are a myriad of other potential challenges the Saudis face if they choose to list Aramco in New York.

“I’d say they’re in a bit of a conundrum because on the one hand they want to list on the exchange that has the broadest volume, but the more sophisticated the investors are on a particular exchange, the more they may be concerned [about things] like risk of lawsuit, geopolitical risks, oil prices … or other types of risks,” Amy Myers Jaffe, David M. Rubenstein senior fellow for energy and the environment at the Center on Foreign Relations, told FOX Business.

Myers Jaffe added that listing in New York comes with a lengthy compliance documentation process and the U.S. also requires a certain level of transparency that the Kingdom may not be used to following.

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The Aramco IPO could attract a $2 trillion valuation and could potentially be the world’s largest. The Kingdom is expecting to raise $100 billion to invest in companies around the world. The idea is that revenue generated from these investments can be used to sustain its budget even when oil prices, or supply, are low, in order to reduce its dependency on energy.

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Hong Kong has been floated as a potential alternative on the inclination that retail investors there may be more likely to trade on the shares.

But there’s another factor that could partially influence the Kingdom’s decision; the Crown Prince’s warm relationship with President Trump.

“I would image the Crown Prince might be influenced by the president saying they should list in New York,” Myers Jaffe said.

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