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London’s Fund Managers Soften Opposition To Saudi Aramco IPO

LON

London’s top fund managers have thrown in the towel on their fight to stop Saudi Arabia’s state oil giant Aramco from listing shares on the London exchange, accepting that the “political will” to lure what is expected to be the biggest IPO in history is too strong to oppose, The Sunday Times reported.

Aramco, which Saudi officials claim is worth US$2 trillion, aims to list 5 percent of the company on one or more international stock markets next year.

In April, UK Prime Minister Theresa May traveled to Saudi Arabia together with London Stock Exchange boss Xavier Rolet to try to sell London as an Aramco listing venue to Saudi Oil Minister Khalid al-Falih, who is also chairman of the Saudi oil company.

Aramco wants to sell just 5 percent in IPO, but under the UK’s Financial Conduct Authority (FCA) rules, a company qualifies for a premium listing only if it has a minimum 25 percent free float, meaning Aramco’s 5% listing would fall significantly short of qualifying—that is, unless the listing rules were changed.

Earlier this month, asset manager Royal London warned against the London Stock Exchange 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.

Earlier this year, the FCA said in a discussion paper that it could create a “distinct international segment”, and “this may be attractive to companies where there is a founding family or government that wishes to retain control rights that are incompatible with a conventional premium listing.”

Related: The Biggest Obstacles For China’s $900 Billion Silk Road

The FCA will publish a follow-up paper in the coming days, in which it will discuss the proposals in detail, according to The Sunday Times.

Just last week, the architect of the Aramco listing and the Saudi official overseeing the IPO plans, Mohammed bin Salman, was promoted to crown prince in a Saudi royal succession reshuffle.

By Tsvetana Paraskova for Oilprice.com

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