Britain seeks looser IPO rules to lure Saudi Aramco float

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Britain wants to loosen rules on listing state companies, a move that experts say is designed to help London win the lucrative IPO of Saudi Arabian oil giant Saudi Aramco but could weaken minority investor influence.

The new rules proposed by Britain’s financial watchdog on Thursday would create a new listing category for companies controlled by sovereign states and come as exchanges around the world are vying to win the Aramco listing, which is expected to be the largest initial public offering (IPO) ever.

Reuters reported earlier this year that the London Stock Exchange Group was working on a new type of listing structure that would make it more attractive for Aramco to join the bourse.

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The proposals come as the government and City of London are trying to keep Britain’s financial markets attractive to international investors and companies after the country leaves the European Union.

The FCA said on Thursday it is proposing a new “premium” stock market listing category that will exempt companies controlled by sovereign states from certain requirements and be available to companies listed in London using depositary receipts, financial instruments used to represent a foreign company’s shares, rather than the shares themselves.

International companies including Russian state firms Gazprom and Rosneft are listed using depositary receipts on the LSE.

“Refining the listing regime in this way would make UK markets more accessible whilst ensuring that the protections afforded by our premium listing regime are focused and proportionate,” FCA chief executive Andrew Bailey said.

Bridging the Gulf

Under the FCA’s proposals, sovereign-controlled companies will be able to obtain a “premium” listing on the London Stock Exchange without complying with certain rules on related party transactions and controlling shareholders.

The changes are likely to make Britain’s stock market more attractive to state-controlled companies just as several Gulf countries are considering listing part of their oil assets. Aside from Saudi Arabia, Oman and Abu Dhabi have also said they might float part of their state oil businesses.

The FCA has set a deadline of October 13 for comment on the proposals, which are part of a wider review it is undertaking into Britain’s listing rules but were brought forward because it said it thought there was a gap in its current rules.