23 August 2018

Legal advisors told to stand down on 'biggest IPO in history'

Eager lawyers and other professional firms to stand down as reports indicate financial, legal and regulatory worries are halting IPO.

Reports are surfacing that financial advisors working on the proposed listing of national oil company Saudi Aramco have been disbanded, as Saudi Arabia shifts its attention to a proposed acquisition of a ‘strategic stake’ in local petrochemicals giant Saudi Basic Industries Corporation (SABIC). The IPO has been regularly touted as the ‘biggest IPO in history.’

Big fees

Lawyers, bankers and stock exchanges in financial centres including London, New York and Hong Kong have been vying for a piece of the share sale action. Lawyers expected to earn big advisory fees in the IPO, which was seen as a gateway to a host of other deals they expected to flow from the kingdom’s planned privatization program. Lawyers, bankers, and auditors had already been involved in drafting the prospectus, and White & Case had been lined up as a legal adviser, according to Reuters’ sources. Khalid Al Falih, the Saudi energy minister, issued the statement early on Thursday insisting ‘speculation surrounding the cancellation of the IPO as not true.’ He stated Saudi remains committed to the IPO, but said the listing would go ahead ‘at a time of its own choosing, when conditions are optimum.’
.
Bending the rules

State oil giant Saudi Aramco was expected to launch a domestic and international stock listing since last year. The plan for the IPO had included a local listing on the Saudi Tadawul exchange and one or more international markets. London, New York, Hong Kong and Tokyo had all been competing to secure the international listing for their exchanges. In London the Financial Conduct Authority had changed its rules to make the listing easier, attracting criticism from lawmakers and others who said adapting regulations to accommodate Saudi Aramco could harm the UK's reputation for good governance. London's listing rules state that more than 25% of a company's shares should be listed, to ensure liquidity, but Aramco plans to sell just 5% of the company, raising the concern about London bending the rules.  In the US, concerns have been raised that some members of the Saudi royal family are worried that a listing in New York may entail legal risks, citing US terrorism legislation that would permit US citizens to sue Saudi Arabia.