The City regulator has changed its listing rules, in a move that boosts London’s chances of hosting the $2tn (£1.5tn) stock market flotation of Saudi Arabia’s state oil company.
The Financial Conduct Authority’s move was criticised, however, by business and investment organisations who said they were disappointed by the decision because it waived some corporate governance rules.
The FCA did not explicitly mention Saudi Aramco, which plans to raise $100bn (£75bn) by selling a 5% stake, but the step is an important one in London’s efforts to attract the listing ahead of rivals New York and Hong Kong.
Aramco is likely to be valued at about $2tn, more than twice as much as Apple, the world’s most valuable company.
The regulator has created a new category with its premium listing regime to allow the state-owned company to list on the London Stock Exchange. It means Aramco will not have to sign up to a controlling shareholder agreement, which requires the biggest investor to operate at an arm’s length from the business, nor be subject to shareholder approval for related party transactions.
The finalised rules, which follow an FCA consultation launched last year, are expected to make London more appealing for an Aramco listing.
The director general of the Institute of Directors, Stephen Martin, said: “The IoD is deeply disappointed that the FCA has decided to press ahead with the creation of a new premium listing category, which reduces key corporate governance requirements.
“This decision has been made despite opposition from across the governance spectrum and without providing evidence as to the necessity for the reduction in standards.”
Royal London Asset Management said it was pleased the FCA had listened to concerns about changing the listings regime, but that “we still think that the new rules fall short of the high governance standards that investors expect in the UK”.
The Investment Association, the trade body for UK investment managers, said there could be “unintended consequences” and called on the FCA to review the segment after two years.
The FCA defended the rule changes, saying the decision would encourage more firms to adopt the UK’s governance standards. Its chief executive, Andrew Bailey, said: “These rules mean when a sovereign-controlled company lists here, investors can benefit from the protections offered by a premium listing.
“This raises standards. This package recognises that the previous regime did not always work for these companies or their investors.”
Bailey has told MPs that waiving rules for sovereign-owned companies will not weaken protections for investors. He met Aramco early last year but said he had not done so again since and had no plans to do so. “To be clear, this was not divined with Aramco,” he said.
The new category, which will be effective from July, was welcomed by the City of London Corporation and the trade body for the financial services industry.
The corporation said it would ensure the City’s global competitiveness , and lobbying body TheCityUK said that Britain could not be complacent despite having one of the “world’s foremost listing regimes.”
The Saudi Aramco IPO had been planned for late 2018 but the Saudi energy minister recently confirmed speculation that the flotation was likely to be delayed until next year.
The valuation of the company will hinge on the oil price. Brent crude recently hit $80 a barrel, but has since fallen slightly in anticipation of the oil cartel Opec increasing supplies after the US asked Saudi Arabia to boost production.
