Post-Brexit London is open for business (no matter how grubby)

The City watchdog’s rewriting of the premium listing rules to accommodate a potential mega-listing in London of Aramco is deplorable

Now we know how the City will be kept open for business after Brexit. If a foreign government, in this case Saudi Arabia’s royal family, doesn’t like the rules in London, the UK is happy to be flexible.

For some, the Financial Conduct Authority’s proposed rewrite of the listing rules to woo state-backed companies is a fuss about nothing. Aramco is an enormous beast that will shower fees on bankers and lawyers, and maybe also burnish London’s standing. It could easily float here under a so-called “standard” listing if it wished. But, if the price of keeping it away from New York is a tweak to the definition of a prestige “premium” listing, so be it.

After all, it will be argued, nobody will be compelled to buy shares in this $1tn, or possibly $2tn, monster. If only 5% of Aramco’s shares are made available to outsiders, the company won’t qualify for inclusion in FTSE indices and tracker funds will have to stay away.

The problem with this relaxed view is that the FCA’s proposed change makes London look ridiculous. The definition of a “premium” listing is well understood and was established by hard experience of how outside investors can be abused by a single controlling shareholder.

Two conditions of a “premium” listing are seen as fundamental protections. First, tight controls must apply when the company and the controlling shareholder are conducting deals with each other. Second, outside shareholders should get a say on the appointment of independent directors. The FCA’s proposal, in essence, is that sovereign-controlled companies can ignore both conditions but still qualify for a premium listing. They’ll have to follow the other premium rules, just not those two.

The FCA’s thin justification is that “sovereign owners tend to be different from private sector individuals or entities in both their motivations and their nature”. Is that really true, though? Some will be different, some won’t, and it’s hard to know in advance. That is the point of applying rules across the board. The current set-up works perfectly well and is popular.

Whatever the FCA says about adapting and updating markets, this exercise seems to be driven by short-term considerations: get Aramco through the door, and worry later about the long-term hit to London’s status as a high-class financial centre. Politicians, obsessed by Brexit, will cheer if the Saudis do indeed choose London. The rest of us should deplore a grubby little arrangement.

AstraZeneca – a Soriot state of affairs

Come on, Pascal Soriot, don’t be shy. Are you staying or going as chief executive of AstraZeneca?

It is astonishing that Soriot and his employer left this question hanging in the air all day on Thursday. Israeli newspaper Calcalist reported on Wednesday that Soriot is about to quit to join Israeli outfit Teva Pharmaceuticals and seemed confident about the details of his new remuneration package, down to the signing-on fee of $20m.

The stock market thought, or feared, there’s something in the tale. AstraZeneca’s share price fell 3.5%, a mighty move for a firm worth £65bn. Soriot’s silence didn’t help. If the tale is rubbish, it would be easy for the company to knock it down without breaching its pedantic policy of never commenting on rumours.

At this stage, all that can reasonably be said is that Soriot’s departure would be extraordinary. At AstraZenca, he’s running one of the world’s finest pharmaceutical companies with a multibillion-pound budget to pursue pioneering research and development. Teva is half the size and most of its business is concentrated in copycat generic medicines, which are surely less interesting for a rounded individual such as Soriot who is genuinely in love with science.

AstraZeneca has also showered him with riches. Last year his package was worth £13m, which ought to be enough to secure his loyalty. Then there’s the fact that 2017 is supposed to be the pivotal year for AstraZeneca. The results of a critical trial on a potential blockbuster lung cancer treatment are due soon, setting the stage for the company to prove it was right to reject Pfizer’s takeover bid in 2014 and back its long-term standalone prospects.

For all those reasons, Soriot is probably staying put. But the shareholders – and, more importantly, his colleagues – deserve to be told. This is not a sensitive takeover situation. You are allowed to apply common sense and speak.

The odd value in RBS

Good news: the National Audit Office says the Treasury’s sale of £2.1bn worth of shares in Royal Bank of Scotland in 2015 was “well planned and organised and represented value for money”. The last virtue is almost unarguable, since the Treasury bagged 330p a share versus RBS’ current share price of 257p. With the benefit of hindsight, one wishes the chancellor had flogged a few more.

There’s one oddity in the report, however. It is how UKFI and its advisers, Goldman Sachs and Rothschild, established the “fair value” range for RBS shares. The process would not have been straightforward, since the bank faced so many litigation, conduct and regulatory issues. A view had to be taken on all, and a conservative bias then applied.

Even against that confusing backdrop, however, the valuation range was remarkably wide – between 177p and 488p per share. That’s not useful advice. It sounds more like well-paid advisers covering their backs.


Nils Pratley

The GuardianTramp

Related Content

Article image
Flotations, corporate collapses and Brexit: the year in business
From WeWork’s crash and burn to the corporate world’s waking up to the climate crisis, 2019 was not a year we’ll forget in a hurry

Simon Goodley

31, Dec, 2019 @6:00 AM

Article image
FCA must backtrack over Saudi oil giant Aramco | Nils Pratley
Plans to rewrite London listing rules to attract premium flotations leave a bad taste in the mouth

Nils Pratley

08, Sep, 2017 @6:22 AM

Article image
MPs to question City watchdog over Saudi Aramco float
FCA to detail whether or not it met ministers ahead of planned rule changes that could lure oil giant’s £1.5tn float to London

Jill Treanor

08, Sep, 2017 @7:37 AM

Article image
FCA's rule change to lure Saudi Aramco prompts criticism
Businesses object as regulator paves way for London to host oil giant’s flotation

Adam Vaughan

08, Jun, 2018 @3:03 PM

Article image
FCA met Saudi Aramco before trying to change rules for $2tn flotation
Regulator has attracted controversy by allegedly seeking to water down rules to lure Saudi oil giant’s IPO to London

Jill Treanor

13, Oct, 2017 @5:31 PM

Article image
Oil giant Aramco's $2tn flotation is still on, says Saudi Arabia
Energy minister in Riyadh denies reports that world’s largest IPO has been cancelled

Angela Monaghan

23, Aug, 2018 @6:49 AM

Article image
Political uncertainty puts London listing for Saudi Aramco in doubt
Decision to rule out UK and Hong Kong would be major blow to both financial centres

Jillian Ambrose

29, Aug, 2019 @4:08 PM

Article image
London's love affair with Saudi Aramco smacks of Brexit desperation | Nils Pratley
The timing of the Treasury’s loan guarantee for the state oil giant deepens a sense of grubby games being played

Nils Pratley

10, Nov, 2017 @11:28 AM

Article image
Saudi Arabia considers IPO for national oil group, Aramco
World’s biggest energy firm likely to be valued at considerably more than $1tn if decision to list it on stock market goes ahead

Terry Macalister Energy editor

07, Jan, 2016 @5:58 PM

Article image
Deliveroo chooses London for stock market float
Food courier valued at $7bn opts for City IPO after government backs moves to let founders retain more control

Jasper Jolly

04, Mar, 2021 @9:53 AM