London has been tipped for the IPO of Saudi Aramco – would this be good for the City?
Stephen Clapham, equities analyst and founder of Behind the Balance Sheet, says YES.
A Saudi Aramco IPO in London would have a number of positive effects. It would create lucrative work for professional advisers here; roadshow activity produces revenue for the hospitality sector; trading generates stamp duty; and it will facilitate future similar IPOs. A successful float of five per cent of Aramco will likely be a prelude to the sale of further tranches of Aramco, of The Abu Dhabi National Oil Company's services arm, and of a stake in Oman Oil Company.
London is the natural choice over New York, whose time zone is a hindrance to Asian investors, and whose listing rules, particularly its onerous requirements on oil reserves accounting, would be an obstacle for Aramco. There is therefore no real need for the FCA to relax our regulations significantly. London’s quality reputation as a listing location must be preserved. Aramco’s owners will be best served by adopting rigorous corporate governance and by investors being protected. A sensible compromise is called for, which means it is unlikely that we have anything to fear from the listing.
Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, says NO.
The FCA is preparing to roll out the red carpet for Saudi Aramco by proposing to create a new listing category for sovereign-owned companies. This sets a dangerous precedent that would allow companies like Aramco and other state-owned firms to access London’s capital markets without having to play by its rules. This corrupts the basic principles of good governance, transparency and investor protections. London seeks to remain at the heart of global finance post-Brexit – a position it holds thanks to its well-functioning capital markets, rule of law and significant, sophisticated pools of investor capital. It is this integrity, not the desire to do deals whatever the consequences, that make the City so attractive.
It was not that long ago when City bankers were successful in wooing companies like ENRC to list here, and that did not end well for investors. Bending the listing rules to accommodate the peculiarities of one large and very lucrative listing could open the floodgates and devalue everything the London market stands for.