Investors have rounded on plans unveiled by the Financial Conduct Authority (FCA) to pave the way for Saudi Aramco to float in London with an easier route on to the stock exchange.
Analysts believe any listing by the oil giant would be the world’s biggest flotation, with the company valued at around $2 trillion (£1.5 trillion), potentially leading to a big payday for any advisers on the deal.
Saudi Aramco is planning to sell only around 5pc of its shares, with London and New York the final two candidates. The company is the world’s largest oil producer and controlled by the Saudi royal family. It is eyeing a float in late 2018. The FCA has proposed a rule change that would allow state-owned companies, such as Aramco, to apply for a special category of premium listing with less onerous disclosure and regulatory requirements.
The City’s strict rules currently block a premium listing unless at least 25pc of the stock is sold. It is understood firms going down the proposed route would not have to disclose transactions with their sovereign owner, while shareholders would not be able to vote in or out independent board members.
The proposals have raised fears among institutional investors of watered down standards. Chris Cummings, chief executive of the Investment Association, which represents 200 investors managing over £5.7 trillion, said: “A premium listed segment without these investor protections is not a premium segment and will not provide the protections that investors expect.”
Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, said: “It looks like the FCA is consulting on amending the existing listing rules to accommodate the peculiarities of one company, which is not a very effective strategy for regulating the market as a whole.”
Meanwhile, investor rights group ShareAction also expressed reservations, saying the changes risked repeating the mistakes of the past, after the London Stock Exchange was forced to tighten up its controls four years ago following governance failures at foreign tycoon-owned Bumi and ENRC.
“As a financial centre, London must be careful not to damage its own reputation for high governance standards,” added Catherine Howarth, chief executive of ShareAction.
However, the London Stock Exchange welcomed the plans, saying “discretionary access” for investors was key to the capital’s success as a global financial centre. The FCA has launched a consultation on the proposals.
Andrew Bailey, chief executive of the FCA, defended the plan, saying it would make UK markets “more accessible whilst ensuring that the protections afforded by our premium listing regime are focused and proportionate”.
He added: “Sovereign owners are different from private sector individuals or companies – both in their motivations and in their nature. Investors have long recognised this and capital markets are well adapted to assess the treatment of other investors by sovereign countries.”
The Saudi royal family is trying to move the country away from its reliance on oil into other industrial sectors under a plan called Saudi Vision 2030.
Report courtesy telegraph.co.uk
Frontpage October 1, 2019