Toronto: The Toronto Stock Exchange's (TSX) efforts to win a slice of the massive Saudi Aramco public listing plays up the country's deep experience in natural resources as part of a broader offer to help the kingdom with its shift away from oil dependence.
In pitch documents obtained by Reuters, the TSX talks up "a customised regulatory environment for resource issuers", its leading position in oil and gas equity capital raising, and strong trading interest from outside the country.
The Canadian pitch is also broader than just for a slice of the Saudi Aramco IPO. On several trips to the kingdom, the most recent in late March, TMX executives have been joined by senior executives from some of the country's biggest banks, brokerages and other financial players as Canada Inc seeks a role in delivering the kingdom's broader Vision 2030 plan.
One source directly involved in the Canadian pitch told Reuters they are focused on convincing the Saudis that Canada excels in 10 of the 12 areas they have targeted for development under that plan, including in mining and infrastructure. The source declined to be named due to the sensitivity of the matter.
"We feel that we have put TMX and Canada's best foot forward and we continue to promote our strengths in pursuit of business opportunities in the region and around the world," TMX said in a statement.
But its best chance of winning a part of the biggest IPO ever, expected to raise about $100 billion as early as next year, may lie in its geography and geopolitics, securities lawyers say.
While the exchange, owned by the TMX Group Ltd, is widely considered an underdog in a race that has also excited larger exchanges in London, New York, Tokyo, Hong Kong and Singapore its case could be bolstered by a recent change in US law that allows those affected by the September 11, 2001 attacks to sue the Saudi government, they said.
"We are inoffensive from a political perspective," said Sarah Gingrich, a Calgary-based partner at Fasken Martineau, who has previously worked in Dubai with Saudi clients for international law firm Freshfields.
That law, the Justice Against Sponsors of Terrorism Act, came into effect in September, after the US Congress overrode a veto by former President Barack Obama.
A group of insurers has since renewed a $6-billion lawsuit against the kingdom, seeking to hold it responsible for business and property damage as a result of the attacks, in which Saudi has long denied involvement.
In a March 17 interview with the Wall Street Journal, the Saudi energy minister, Khalid Al Falih, said the so-called "terror law" is one consideration in the country's decision on whether to list in the United States.
Falih, who is Saudi Aramco's chairman, declined to comment on the IPO process when reached by Reuters.
It was not clear if the issue was discussed during US President Donald Trump's recent visit.
A spokeswoman for the NYSE, which sources have said planned to visit Saudi soon after Trump's visit, declined to comment on their efforts to win Saudi Aramco's business.
Nasdaq, which is a technology partner to Saudi Arabia's exchange, is also pitching for the listing, while the London Stock Exchange is working on a completely new type of listing structure to woo Saudi Aramco, Reuters has reported.
Small market, big energy focus
Canada-listed oil and gas companies raised 22 per cent of global energy financing over the past five years, the TMX pitch documents show, second behind the NYSE's 44 per cent.
The documents put Canada in third place behind Chinese and Hong Kong exchanges, and the United States for total capital raised in 2016, noting that TSX-listed companies raised 28 per cent more than fourth-placed LSE.
They say more than 40 per cent of TSX trading originates outside the country and that bid-ask spreads, a key measure of liquidity, are among the lowest in the world.
Still, while Canada boasts significant expertise in oil and gas financing and strong interest from both institutional and retail investors, it is dwarfed by the much larger US market.
The oil and gas companies listed on its main TSX exchange and the junior TSXV have a total market capitalization of C$325 billion ($239 billion), TMX says.
By comparison, the New York Stock Exchange says its oil and gas companies — which include super majors ExxonMobil Corp , Chevron and secondary listings for Royal Dutch Shell and Total — are worth $3.3 trillion.
Neither the source in the TMX delegation nor the external lawyers said listing and regulatory requirements would prove much of an obstacle to a Canadian listing, especially if it were to be a third or fourth option.
But Canada would only find a way in to the action "if their (Aramco's) bankers think they will get sufficient enough market interest here that it will help promote the stock price and give them some liquidity and trading," said Darrell Peterson, a partner with Bennett Jones in Calgary.