London needs to win over megafloats like Aramco if the City is to retain its financial health post-Brexit

 
Tracey Boles
A flame from a Saudi Aramco (the nationa
Saudi Aramco has yet to pin down which exchange it will choose for a secondary listing (Source: Getty)

The London Stock Exchange, beating heart of the City, enables companies from around the world to raise money from outside investors.

Frequent and regular IPOs are the measure of its health. Big wins are needed for London to hold onto its leading status as a financial centre post Brexit.

Next year’s mega-IPO of the Saudi national oil company Aramco would certainly be a feather in its cap. While only five per cent of the company’s shares will be listed, $100bn (£80bn) is expected to be raised from the float. This would dwarf the record $25bn raised in the US by Chinese online retailer Alibaba in 2014.

Read more: Saudi Aramco mulls $2bn bond sale ahead of mega float

The sheer size of the Aramco IPO will require a dual or even triple listing. The Saudi stock exchange will take part but, with a market capitalisation of just under $450bn, it is far too small on its own for the oil giant’s requirements.

The deep markets of the NYSE, Japan Exchange Group, LSE or Hong Kong will also be needed.

London will have to play to its advantages to come out ahead of the pack. It can draw on its unrivalled oil and gas institutional knowledge base, as demonstrated by the presence of BP, Shell, Lukoil and Rosneft, on the LSE. As the closest time zone to Saudi Arabia, London is also a practical choice. Historical ties will help, plus the fact that many leading Saudis have London as a second home.

Read more: The largest ever planned IPO could be overvalued by 500 per cent

Should Aramco choose the LSE for one of its listings next year, it will give the wider City a huge lift, and signal to other companies that it is the premier exchange to list on as the UK exits the EU.

The Financial Conduct Authority recently proposed reforms aimed at providing investors and analysts with better and earlier information – a move that, while not popular with everyone, should make the IPO market more transparent and attractive.

Read more: A tech fund led by ten oil majors has chosen London for its home base

The UK government also has a role to play by providing as much security as possible to City firms in the run-up to Brexit on tax, infrastructure, human capital and regulation. By retaining a competitive edge in these key areas, companies like Aramco will view London as the best exchange to access capital markets. The health of the City rests on it.

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