Saudi Aramco IPO carries significant execution risk, top regulator says

by Dramelin 6:30 AM 0 comments

One of Saudi Arabia`s top financial regulators has warned the listing of the country`s state oil firm Aramco, which is set to become the biggest initial public offering (IPO) in history, will carry great execution risk.
Mohammed El-Kuwaiz, chairman of the Saudi Arabian Capital Market Authority, told CNBC Friday: "The main risks are around execution.
Whenever you have something which has this high an aspiration level, and this tight a timeline, the challenge is to get it done and get it done with the right level of quality.
" His comments come in the wake of a Bloomberg report suggesting the Aramco IPO could be pushed back to 2019 due to the large amount of preparatory work that still needs to be completed ahead of the listing.
Aramco hit back at the claim, stating the IPO "remains on track".
The Saudi government is yet to announce whether Aramco`s primary listing will be in London or New York, but it has decided that a portion of the firm will be floated on the country`s domestic stock index the Tadawul.
Mohammed El-Kuwaiz acknowledged major questions about the listing still remain to be answered, but he expressed confidence Saudi Arabia`s capital markets will be ready for the mega-flotation.
"We`ve found very few gaps in our local regulations and we`re actually ready with minimal changes to accommodate the Aramco IPO or any other big listing," he told CNBC.
The Saudi Arabian Capital Market Authority Chairman also argued that the much-anticipated IPO is galvanizing broader efforts to reform the country`s financial system.
He characterized the Tadawul as an "island unto itself", before adding: "The market was viewed as a local utility to be consumed by local investors and local issuers.
The new thinking is to deregulate the market and open it up for foreign investors.
" The Saudi Arabian Capital Market Authority, which regulates the Tadawul, has already pushed through a wave of reforms in recent years.
Most notably, it has made it possible for investors to short-sell equities listed on the country`s stock exchange and helped introduce a corporate governance code which prohibits public companies from combining the roles of chairman and CEO.
Saudi Arabia is hoping the attention generated by the Aramco IPO will lead to a pick-up in the number of non-domestic companies listing on its markets.
"We see an opportunity to reform and change the country like no time that we`ve experienced in the past," Mohammed El-Kuwaiz said.