{"id":5471,"date":"2017-06-24T14:09:46","date_gmt":"2017-06-24T14:09:46","guid":{"rendered":"http:\/\/dominiclevent.com\/blog\/?p=5471"},"modified":"2019-04-17T17:17:12","modified_gmt":"2019-04-17T17:17:12","slug":"lawyers-warn-saudi-aramco-of-new-york-ipo-litigation-risks","status":"publish","type":"post","link":"https:\/\/dominiclevent.com\/blog\/lawyers-warn-saudi-aramco-of-new-york-ipo-litigation-risks\/","title":{"rendered":"Lawyers warn Saudi Aramco of New York IPO litigation risks"},"content":{"rendered":"


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Saudi Arabia is nearing a long-awaited decision on the main international stock exchange for the initial public offering<\/a> of its state energy company, with lawyers advising the kingdom that a New York listing poses the greatest litigation risk of any jurisdiction.<\/p>\n

White & Case, Saudi Aramco\u2019s legal firm on the float, and others offering informal counsel have in recent weeks briefed top oil executives and the kingdom\u2019s highest authorities, emphasising the US\u2019s litigious culture, four people familiar with the matter have said.<\/p>\n

The advice comes as a trade body representing the UK\u2019s largest asset managers with \u00a35.7tn in assets warned that no exceptions should be made to current rules requiring new \u201cpremium\u201d London listings to float 25 per cent of their shares to gain inclusion into the FTSE indices. The Saudi government plans to sell less than 5 per cent of the company\u2019s equity in a listing.<\/p>\n

The kingdom\u2019s powerful deputy crown prince Mohammed bin Salman, who is the ultimate head of the country\u2019s oil affairs, is expected to make a final decision within weeks, according to an internal timetable.<\/p>\n

New York and London<\/a> have been in a battle<\/a> among international stock exchanges for a slice of what is set to be the world\u2019s biggest ever flotation.<\/p>\n

A New York Stock Exchange listing alongside one on Saudi Arabia\u2019s Tadawul exchange has been the favoured listing option, according to documents seen by the Financial Times. Saudi officials and Saudi Aramco\u2019s financial advisers believe it is the venue with the deepest pool of investors and the most prestigious. <\/p>\n

A premium category listing on the London Stock Exchange<\/a> alongside a domestic offering is seen as the next best option, followed by a standard listing on the LSE, the documents show. <\/p>\n

Legal counsel, which usually takes precedence over advice from financiers, implies London is now the frontrunner. <\/p>\n

\u201cThe company is very conservative,\u201d said one person briefed on the matter. Saudi Aramco\u2019s assets in the US, including the country\u2019s biggest refinery Motiva, were more vulnerable to legal action, he said. \u201cIt would be reckless to list in New York when advised so strongly against it,\u201d he said.<\/p>\n

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It would be reckless to list in New York when advised so strongly against it<\/p>\n<\/div>\n<\/blockquote>\n

The legal risks arising from a New York listing include new US terrorism legislation that could allow families of the victims of the 9\/11 terror attacks to sue Saudi Arabia. In addition, Saudi Aramco could face class-action litigation should it not comply with strict rules from US regulators on reserves and data disclosure for oil companies. Aggressive shareholder lobby groups in the US are also seen as a threat.<\/p>\n

Lawyers still say they can defend Saudi Aramco in any jurisdiction, and London too has its obstacles. Chris Cummings, chief executive of the UK\u2019s Investment Association, wrote last week to the financial regulator as part of a consultation over stock market listings that the rules should be maintained \u201cirrespective of the size of the company being listed\u201d. <\/p>\n

While the letter to the Financial Conduct Authority did not mention Saudi Aramco by name, it said that the current prevention of companies with a less than 25 per cent free float being accepted into the FTSE 100 should \u201cbe preserved at all costs\u201d.<\/p>\n

The UK financial watchdog is exploring ways to create an international segment to accommodate certain overseas companies. Although regulators have not named Saudi Aramco, it is expected exceptions will be made for the state-owned entity, including allowing it to have a premium listing, one person said. <\/p>\n

Company executives and advisers to Saudi Aramco are pushing for a swift decision on the international exchange to push forward with other crucial IPO planning milestones \u2014 from governance structures to investor marketing.<\/p>\n

The IPO team has been instructed by Riyadh to bring forward the IPO launch date \u2014 from the latter half of 2018 to the second quarter, three people have said. Insiders say the original timeframe is still the most likely.<\/p>\n

A London listing would be a blow for Prince Mohammed, who has privately pushed for New York, several people have said. However, in a shift from his previous stance, the 31-year-old royal has asked advisers to analyse how capital raising will be affected should New York be excluded, one person said.<\/p>\n

Saudi Aramco and White & Case declined to comment.<\/p>\n

Additional reporting by Arash Massoudi and Robert Smith<\/em><\/p>\n<\/p><\/div>\n


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Saudi Arabia is nearing a long-awaited decision on the main international stock exchange for the initial public offering of its state energy company, with lawyers advising the kingdom that a New York listing poses the greatest litigation risk of any jurisdiction. White & Case, Saudi Aramco\u2019s legal firm on the float, and others offering informal … <\/p>\n

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