Published: Thu, July 13, 2017
Sci-tech | By Carrie Guzman

Britain seeks looser IPO rules to lure Saudi Aramco, worries investors

Britain seeks looser IPO rules to lure Saudi Aramco, worries investors

Aramco's IPO plans made a splash a year ago when they were first announced as Saudi Arabia seeks to solidify its financial position amid stubbornly low oil prices.

However, some fund managers have hit out at the move. Refining the listing regime in this way would make United Kingdom markets more accessible while ensuring that the protections afforded by our premium listing regime are focused and proportionate.

The few existing listed companies in the original premium segment that would be eligible for the new category would be entitled to apply to transfer their listing.

Deputy Crown Prince Mohammed bin Salman, who is in charge of the Saudi Arabia's economic policy, has said the IPO will value Aramco at $US2 trillion or more, which is around two-thirds the size of the entire London Stock Exchange.

Under the changes, sovereign firms would be able to list under a new category within the premium listing rules that would allow companies to list depositary receipts instead of stock.

The FCA, the umbrella organisation overseeing the UK Listing Authority, which is the direct regulator of LSE, first floated the idea of a new type of listing in February and its officials have been sifting through responses from various interested parties over the past few months.

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The New York Stock Exchange, which is also competing for the Aramco listing, has not offered any such regulatory changes, a source familiar with talks between NYSE and Aramco said.

The FCA said sovereign owners were different "in both their motivations and their nature" from private ones so it was legitimate to grant them an exemption from some of the requirements for private companies.

The London Stock Exchange is seen one of the frontrunners for the IPO, which is expected to a 5 per cent dual listing on Saudi Arabia's Tadawul and one other global exchange. Apart from Aramco, large state-owned companies including Abu Dhabi National Oil Co are planning stock sales for their businesses.

"Investors have long recognised this and capital markets are well adapted to assess the treatment of other investors by sovereign countries", he said.

A sovereign controlling shareholder will not have to enter into a legally binding arrangement to ensure that transactions between the company and the controlling shareholder will be conducted at "arms length" and on commercial terms.

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