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Emerging Markets

Old Money: London's foreign listings

City of London

Saudi Aramco’s jumbo IPO is taxiing towards take off, though the timing and any co-listing locations along with Riyadh have yet to be revealed. London and New York’s exchanges are eager to host a co-listing, with Toronto, Hong Kong and Singapore also in the frame for what promises to be the biggest ever IPO, valuing the company at $2tr.


London’s hosting of foreign listings began almost two centuries ago. The first wave of fundraisers in the 1820s included a bevy of Latin America’s republics that had recently won independence from the Spanish empire. 

These far-away exotic countries were entirely unknown to London investors but they relished the premiums that they were prepared to pay for funds. Brazil, Buenos Aires, Chile, Columbia, Guatemala, Mexico and Peru made their debut in the London market, as well as the non-existent Poyais; a creation of the Scottish soldier and swindler, Gregor MacGregor.

After the governments came a deluge of Latin American mining company IPOs. But the hoped for El Dorados proved as illusory as Poyais. Soon all the sovereigns were in default and most of the miners had disappeared.

A new wave of foreign loan listings got underway in the 1860s. Once again Latin America was the focus of the boom though this time there were additional exotic places offering premiums, notably Egypt, Morocco, Tunis and Turkey. An issue by Venezuela in 1862, despite the country being in the throes of a bloody civil war, was indicative of the revived taste for risk among investors. Perhaps unsurprisingly, Venezuela defaulted two years later.

Most remarkable of all the early exotic borrowers was the secessionist southern states in 1863 in the midst of the American Civil War. The Confederacy was inferior to the Union in every material and martial capacity but nonetheless it was able to make a £3m “cotton loan” bond issue in London.


The North’s naval blockade of Southern ports halted the export of raw cotton by the world’s biggest producer, which sent the world price sky-high and generated a depression in the Lancashire cotton industry.

Meanwhile, cotton was piling up in the South. The smart feature of the Confederate bonds was that they were convertible into bales of cotton in New Orleans and other Southern ports at a parity that meant huge profits for bondholders if the raw cotton could reach the world market.

Conforming to the practice of the day, the bonds were issued partly paid with a series of further instalments until they were fully paid when they became eligible for conversion into cotton. The investment bankers working for the Confederacy conducted very active support operations to bolster the market price of the partly-paid bonds to encourage payment of further instalments.

To do so they used funds already subscribed, to the bewilderment of Confederate officials as to why they were buying their own bonds. Simultaneously Union financial agents spread bear rumours and aggressively shorted the bonds to drive down the price.

Buccaneering intermediaries acted as agents for bondholders in the conversion operation. They organised the acquisition of the raw cotton in the southern US and then used fast steamships to run the Northern blockade to Cuba — just 90 miles offshore — where the bales were transferred to neutral shipping for transport to Europe. A successful run generated a massive return, though there was the downside risk of being blown out of the water by the Union navy.

The issue generated £1.6m of vital foreign exchange for the Confederacy and enriched converting bondholders and their agents — though those still holding bonds in 1865, when the Confederates lost the war, were not so happy.

London IPOs played a key role in the globalisation of the world economy in the late 19th century and again since the 1980s. In the decades up to the First World War a significant component was fledgling petroleum companies, particularly wildcatters in Russia’s distinctly exotic Caucasus and Caspian oil fields.

But the international oil industry soon settled down as a cartel dominated by the “seven sisters” oil majors plus an array of independents, national oil corporations and consortia notably the Arabian American Oil Co. (Aramco), which was renamed Saudi Aramco in 1988 following the Saudis taking full managerial and operational control of the firm, although Saudi Arabia had owned it outright since 1980.

The opportunity for private investors to partner the Saudi state in ownership of the world’s largest oil company by revenue marks the latest turn in the colourful evolution of exotic foreign listings.