- The CEO of the London Stock Exchange has been courting the Saudi Kingdom to lure the IPO of Saudi Aramco, the country’s state-run oil company. It’s a deal potentially worth $2 trillion.
- But David Schwimmer cancelled a recent visit to Riyadh after the disappearance and presumed murder of Saudi journalist Jamal Khashoggi.
- Unfortunately, London really needs a deal of that size to shore up its post-Brexit reputation.
- The Saudis say they want to place their IPO in 2020 or early 2021.
LONDON – The CEO of the London Stock Exchange joined a host of other financial CEOs in pulling out of the “Davos in the Desert” conference in Riyadh later this month- a symbol of mounting international disapproval of the Kingdom after the disappearance – and presumed murder – of journalist Jamal Khashoggi.
The decision by David Schwimmer, (the LSE CEO, not Ross from Friends), was a potentially complicated one, however. The exchange has been actively courting the Kingdom in a bid to lure the IPO of Saudi Aramco, the country’s state-run oil company.
Crown Prince Mohammed bin Salman told Bloomberg that the IPO plan is on track for late 2020 or early 2021. But they haven’t decided where to list what would be the world’s biggest share sale. Aramco has been valued at a whopping $2 trillion, (though the Saudis are expected to list only about 5% of that).
The chance to list Aramco would shore up the British capital’s financial dominance in Europe, a status very much under threat by Brexit. The LSE owns the world’s biggest derivative trade clearing house, and clearing is one of the businesses expected to be hit hardest by Brexit. More than €1 trillion ($1.1 trillion) in trades are cleared in London every day, and other finance hubs like Frankfurt and Paris are drooling at the opportunity to syphon some of those trades away once Britain leaves the EU.
In other words, a Brexit-battered London needs this IPO. UK Prime Minister Theresa May and Schwimmer’s predecessor, Xavier Rolet, signalled that loud and clear when they went to Riyadh together last year in a bid to woo the Saudis, who were deciding between stock exchanges in New York and Asia as well.
The LSE didn’t immediately respond to a request for comment.
Whether Schwimmer’s refusal to attend the conference has closed off the LSE’s chances of listing Saudi Aramco remains to be seen. But the Saudis have hinted at retaliation for “any threats and attempts to undermine it” – there’s even talk of the Kingdom hiking oil prices over the Khashoggi issue.
For the LSE and other stock exchanges, the Saudis can dangle a $2 trillion incentive to fall in line.