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The UK Financial Conduct Authority, the country’s financial markets regulator, has proposed a change in rules for the listing of new companies in a bid to win the heart of Saudi Aramco. The Kingdom plans to list 5 percent of the state-owned energy company next year.
FCA’s proposal essentially comes down to creating a new category within its rules for premium listings, “to cater for companies controlled by a shareholder that is a sovereign country.” The aim is to convince Aramco to go for the premium, rather than the standard, listing.
Aramco’s IPO plans made a splash last year when they were first announced as Saudi Arabia seeks to solidify its financial position amid stubbornly low oil prices. Initial enthusiasm and huge valuations of the world’s largest oil company in terms of production gave way to doubts about Aramco’s actual value. Riyadh calculations valued the company at US$2 trillion, but the price environment in oil and the historical lack of transparency with regard to Aramco’s assets and operations are putting a question mark over that figure.
Aramco wants to sell just 5 percent, but under FCA rules, a company qualifies for a premium listing only if it has a minimum 25 percent free float, meaning that Aramco’s 5-percent listing would fall significantly short of qualifying—that is, unless the listing rules were changed.
Earlier this month, asset manager Royal London warned the London Stock Exchange against changing initial public offering rules to better suit the tastes of Riyadh. However, according to The Sunday Times, a subtle intervention by the FCA has softened investors’ opposition to a possible Aramco listing in London. “London is not exactly in a position to turn business down at the moment,” one fund manager in the City told The Sunday Times.
Interestingly, observers expected the LSE to initiate any changes in the rules of the game—the bourse is a favorite for the listing. Instead, the proposal for a change is coming straight from he financial industry watchdog, in apparent confirmation of the above-quoted fund manager.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.