Saudi Aramco would be now allowed to list its shares at the London Stock Exchange after a new category was been approved for companies that traded on the LSE.
There have been accusations against the LSE that it loosened corporate governance rules so that it can accommodate very large listing.
The move put the “UK’s global reputation as a leader in good governance” at risk, said the Institute of Directors.
London and New York are both trying to woo the listing of Saudi Aramco, the state owned oil company of Saudi Arabia whose listing is being touted to be the largest every IPO through its divestment of 5 per cent of its stock through the IPO.
However, there has yet to be any confirmation from Aramco about whether it is at all listing its stock or from where it intends to list them. there have been some reports in the media that claim that the oil giant is also considering private share sales.
There was “considerable benefit to investors” from the change of rules, said the City watchdog.
“These rules mean when a sovereign controlled company lists here, investors can benefit from the protections offered by a premium listing,” said Financial Conduct Authority chief executive Andrew Bailey.
However, the Institute of Directors said it was “deeply disappointed”, calling the move “a reduction in standards”.
While continuing to oppose the move of including companies in the new category in major equity indices such as the FTSE 100 because that would result in investment in them being done by UK savers, the Investment Association e3xpressed satisfaction that some of the concerns of the investors was reflected in the finalized rules.
“Savers must have confidence that a company is run for all shareholders,” the Investment Association’s chief executive Chris Cummings said.
He expected the FCA to review the new category after two years, Cummings added.
The rules were “the product of a thorough and transparent process”, said TheCityUK, a membership organisation for London’s financial sector. It added that it was “key” that the decision be reviewed by the FCA “in a timely manner”.
The sale of 5 per cent of stocks of Saudi Aramco is being sold as a part of the country’s vision 2030 program and Mohammed bin Salman, Saudi Arabia’s Crown Prince, wants to generate funds through this IPO. Saudi Arabia wants to diversify its economy and reduce the dependence of its economy on oil.
Companies will be able to seek admission to the new category on the London Stock Exchange from 1 July 2018.
(Adapted from BBC.com)