UK to bring in ‘sovereign listings’ regime

The Financial Conduct Authority (FCA), the UK’s main market regulator, wants to change the country’s market rules to make it easier for foreign government-owned companies to list their shares in London.
The new rules could help attract Saudi Aramco to the London Stock Exchange when the oil giant lists some of its shares in an estimated $100 billion initial public offering (IPO) next year, as well as other government-owned companies in the Middle East and elsewhere.
The FCA has opened a consultation process for investment professionals to study the proposals and respond by the end of the year. The proposals would allow government-owned companies to access a “premium” listing, regarded as the top-quality investment grade, rather than a “standard” listing, which would deter some investors.
The regulator said that “the rationale for having a distinct category for these companies is to create a new listing option for companies of a distinct type which may wish to access UK markets and choose the higher standard represented by our premium listing regime rather than standard listing.
“Over the past decade the FCA has given careful consideration to the appropriate treatment within the premium listing regime of companies with controlling shareholders. However, this consideration largely addressed instances where the companies were controlled by private sector entities,” it added.
Andrew Bailey, chief executive of the FCA, said: “Regulatory protections for investors lie at the core of the listing regime. However, it is important that these protections remain well-targeted. Refining the listing regime in this way would make UK markets more accessible whilst ensuring that the protections afforded by our premium listing regime are focused and proportionate.
“Sovereign owners are different from private-sector individuals or companies — both in their motivations and in their nature. Investors have long recognized this and capital markets are well adapted to assess the treatment of other investors by sovereign countries.”
Under the new category’s proposed rules, a sovereign shareholder would not be treated as a related party, meaning it would not need prior shareholder approval for a transaction between the government and the company.
The new proposals do not suggest a change to the current rules that a company must flow at least 25 percent of its shares to get a “premium” listing. This can already be overruled if the regulator is satisfied that more than £100 million ($130 million) of shares can be sold. If Aramco meets its $2 trillion valuation, the sale of a 5 percent stake would raise much more than that.
Aramco has already cleared one hurdle to a potential London listing by saying it would not seek to be included in the FTSE 100 index of leading companies. For that, at least 50 percent of a company has to be floated on the market and in any case, inclusion of a gigantic company like Aramco in the FTSE 100 would distort the index, analysts believe.

Source: Arab News