London fund managers soften on Saudi Aramco float ahead of new Financial Conduct Authority paper

Courtney Goldsmith
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Mohammed bin Salman was appointed crown prince of Saudi Arabia last week (Source: Getty)

London fund managers are warming to compromises on corporate governance concerns caused by the potential listing of Saudi Aramco on the London Stock Exchange, according to reports.

Stock markets around the world have fought to win the initial public offering (IPO) of the Saudi state-owned oil company, which is thought to be the world's biggest float.

Aramco is said to be worth about $2 trillion (£1.6 trillion), but it wants to sell just five per cent of its total share capital. UK listing rules require a minimum 25 per cent free float to qualify for a premium listing.

Britain's fund managers had previously expressed concern over "bending the rules" for the Saudi oil giant, however, one investor told the Sunday Times they had now accepted the "political will" to attract the IPO was too strong to fight.

"London is not exactly in a position to turn business down at the moment," one City fund manager told the Sunday Times.

Prime Minister Theresa May and London Stock Exchange chief executive Xavier Rolet visited Saudi Arabia in April to fight London's corner with the Saudi oil minister and chairman of Aramco, Khalid al-Falih.

Last month, the Financial Conduct Authority (FCA) proposed a new category of listings for large international companies that fail to meet the premium listing standards but are more appealing to investors. FTSE tracker funds would not be forced to buy the shares of companies in this segment.

Sources told Reuters the regulator was crafting the new segment specifically with Aramco in mind.

The FCA is expected to publish more details on this segment in a paper on Tuesday.

Saudi Aramco did not immediately respond to a request for comment.

Meanwhile, a Saudi power shift was announced last week as King Salman appointed his 31-year-old son, Mohammed bin Salman, as crown prince.

Salman, who already oversaw defence and energy policy, has a reputation as a bold reformer. He has led sweeping changes to end the Gulf kingdom's reliance on oil, called Vision 2030, and he also chairs the supreme board of Aramco.

After the announcement, Helima Croft, an analyst at RBC Capital Markets, said the shift signals "full steam ahead" on the planned partial listing of Aramco.

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