The London Stock Exchange is one of the biggest stock markets outside the stock trading grounds in the United States. Having said that, every stock exchange would love to list more companies not only to increase fluidity and movement but also as a means of increasing the stock exchange's bottom line. After all, they make money from every transaction.
This is why London Stock Exchange is trying to create a new structure for listing as a way of enticing Aramco's Initial Public Offering.
UK's biggest stock exchange is working on restructuring the rules so it would allow Aramco to have a primary listing or at least a status that is equivalent to what is considered as a primary listing without being subjected to the rigorous requirements that every primarily listed company goes through. This is according to a report made by Reuters last Wednesday night.
Before a company can gain a premium listing on the London Stock Exchange, the rules state that a company must have at least 25% of its shares floated on the exchange. However, a company can forgo this rule if the FCA allows an exception.
This is where Aramco runs into trouble. Aramco's plan is to float only 5% of its total shares during its upcoming IPO. The said 5% translates to between 50 and 100 billion dollars. With such a huge number, Aramco would claim the world's biggest IPO by market capitalization. The London Stock Exchange would love to welcome Aramco on board, but the planned 5% is obviously a problem when it hits the London Stock Exchange's 25% float rule.
Aramco is still looking where to list the shares of the company. The Saudi-owned oil company will be valued at approximately $2 trillion by 2018.
London is not the only one that is trying to attract Aramco's attention. In fact, stock exchanges in Singapore, Toronto, Hong Kong, and New York are all vying to host Aramco's IPO float.
Furthermore, it seems Saudi Arabia and Aramco are not taking any chances. It's been reported that Morgan Stanley, HSBC, and JPMorgan have been appointed by the state to advise and manage stock exchange dealings.
According to Prince Mohammed bin Salman, Saudi Arabia's chief economic policy maker, Aramco is valued at $2 trillion or maybe more. To give you a better perspective of how huge such an evaluation would be, $2 trillion is equivalent to two-thirds of the entire value of London Stock Exchange.
Not everyone is convinced that Aramco is valued at those astronomical numbers. This is not an unfounded skepticism when Aramco has not yet disclosed any official financial details like profits or sales.
According to some experts and FP estimates, when using Brazil's Petrobras and British Petroleum as a reference point to oil company stock sales, an accurate evaluation of Aramco would be $1.1 trillion at best.
As of the moment, Aramco and Saudi Arabia have yet to give an official statement on where to host the company's IPO. While there's no formal announcement yet, Aramco is planning to make the IPO happen during 2018.
