Saudi Aramco London float rules relaxed
Investor fury at Financial Conduct Authority over softer rules for Saudi Aramco float: The Times report that ‘the Financial Conduct Authority was accused of bowing to pressure from Downing Street and the London Stock Exchange and watering down the normal investor protection rules to accommodate Saudi Aramco.’ (24 July)
ShareAction, the investment charity, said: “Investors should be nervous about any dilution of protections which were specifically introduced to avoid a repetition of governance issues associated with Bumi and ENRC [two foreign-controlled floats that ended in disaster for investors].” (The Times, 14 Jul). Alliance News write the charity said London “must be careful not to have unintended consequences” and “damage its own reputation” Toby Belsom, Head of Research & Analytics at ShareAction, previously wrote that sacrificing some shareholder rights would tarnish London’s longer-term standing in ‘Investors need to watch Saudi Aramco London listing carefully’ article for Responsible Investor (23 May)
The Telegraph report that ‘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. … 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 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.”
‘Despite its size, Saudi Aramco would not quality for an entry in the FTSE 100 stock market index, which would require major City investors to buy the shares to enable them to run their tracker funds’, reports The Guardian. Chris Woods, a managing director at FTSE Russell, said: “The index ground rules include the requirement to have a premium listing in London, an assigned nationality of UK, and minimum free floats of 25% for UK incorporated companies and 50% for non-UK incorporated companies. All these requirements will remain unchanged.”
The Financial Times report that ‘The UK regulator’s proposals come just four years after Britain’s listing regime had to tighten controls in the wake of a string of corporate governance failures in overseas-headquartered companies controlled by foreign tycoons, including mining groups ENRC and Bumi. Both became cautionary tales about the dangers of bringing resource companies from emerging markets to the London market.’ The FT’s Lombard columnist Kate Burgess writes the FCA set out a “poor rationale for setting a knockdown price for a premium listing. The fees that Aramco will pay for a London quote may put dollar signs in the eyes of the LSE and bankers. But it is a small consideration for the risk to London’s reputation for taking only the best. Taking the money leaves the UK market open to the claim that “open for business” actually means, in the words of one investor, “open for rent”.
To receive a summary of stories like this on investors and climate change in your inbox (once or twice a month), subscribe here.
