Do not bend rules for Saudi Aramco’s $2 trillion flotation, argue experts

● FCA’S rule on minimum 25 per cent stake being floated should be adhered to

Oil giant Saudi Aramco must play by the rules if it picks the City for part of its historic $2 trillion (£1.54trn) flotation and any attempt to grant it special concessions would be “highly inappropriate”, a top investment fund has warned.

Aramco, the world’s biggest oil firm, is preparing to list around 5 per cent of its shares, and London is vying with other major financial capitals to secure the international side of the deal.

However, Financial Conduct Authority (FCA) rules say that companies looking to list on the London market should sell at least 25 per cent of their shares, in order to warrant a “premium” status.

Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, said this threshold should be strictly enforced.

“Any attempt to bend the listing rules in order to facilitate the initial public offering of Saudi Aramco is highly inappropriate and flagrantly ignores the principles which the UK’S listing rules were designed to defend,” she said.

Although the listing would clearly be a “prize asset” for the Londonstockexchange(lse), Ms Hamilton Claxton said that an attempt to list just 5 per cent of the company “flies in the face of what is acceptable”.

She said: “(The rules) should not be tampered with, no matter how attractive the prize.”

Aramco’s flotation would make it the largest initial public offering (IPO) in history.

The FCA rulebook states that exceptions can be made to the 25 per cent minimum level rule, provided liquidity is not impacted by selling a smaller stake.

In the case of Aramco, it could be possible to bypass the rules, given even a 5 per cent slice could be worth as much as $100 billion (£77.2bn).

But Hamilton Claxton argued that the 25 per cent threshold is a norm established to maintain the integrity of the market, and that making special exemptions could lead to “a slippery slope”.

She added: “If this deal is forced through without adherence to the UK’S listing rules, there is a real danger further listings could emerge where large international firms are able to access UK capital markets without playing by the rules.”

Hamilton Claxton said that given the size of Saudi Aramco, even a 5 per cent listing would mean the stock would become a significant part of many passive equity funds.

“The pension funds of millions of British savers could end up holding Aramco shares without many of the governance protections usually available to UK investors,” she added.