Warnings Mount Against Rule-Bending For Aramco IPO In London

Royal London, an asset manager, has warned against the London Stock Exchange changing initial public offering rules to better suit the tastes of Riyadh, which is preparing to take Aramco, the world's biggest oil company by production, public.

The fund's corporate governance manager, Ashley Hamilton Claxton, said in a statement that "Any attempt to bend the listing rules in order to facilitate the IPO of Saudi Aramco is highly inappropriate and flagrantly ignores the principles which the UK's listing rules were designed to defend. While the listing would be a prize asset on the exchange due to the sheer size of the firm, the attempt to list just 5 per cent of the total share capital flies in the face of what is acceptable."

The latter part of the statement refers to the requirement of floating at least 25 percent in a premium listing and comes in response to news that the LSE and the Financial Conduct Authority are at the moment working on changing the rules-a change which would accommodate the Aramco listing as premium rather than secondary.

The London Royal statement also follows on the heels of a similar warning from Financial Times associate editor John Gapper, who wrote yesterday that "The point of listings rules is to attract as many companies as possible while ensuring they are trustworthy. There is a tension between the two - laxer rules can lure more issuers in a race to the bottom - but in the end, as the Financial Conduct Authority noted recently, "high corporate standards [lead] to high levels of investor confidence and, in turn, a vibrant market."

Related: Saudi America - How New Tech Is Creating Another Oil Boom

Aramco would certainly be a tasty morsel for any stock exchange, but the short list to date seems to have narrowed down to NYSE and LSE. It may well be that the London exchange comes out a winner.

Earlier this month, a legal adviser to Riyadh said, as quoted by the FT, that listing Aramco in New York will come with a risk of litigation, after the passing of the Justice Against Sponsors of Terrorism Act, which allowed families of the victims of the 9/11 terrorist attack to sue Saudi Arabia. In fact, in March this year, the families of 850 of the victims did start a class action suit against the Kingdom.

Royal London's Claxton said the fund manager will "lobby strongly" against any kind of special treatment for the Saudi company.

By Irina Slav for Oilprice.com

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