Proposed changes to Britain's listing regime are likely to attract a series of state-backed companies to London's stock markets but as Silvia Antonioli reports, the new rules might lower the quality of companies on its stock exchange and hurt minority shareholder.
Hosting the biggest IPO ever is a big incentive for Britain and with a proposed new set of listing rules, the London Stock Exchange could attract state-backed companies beyond Saudi Aramco. Global exchanges are competing to attract the floatation of Aramco next year and the UK financial regulator has boosted London chances with a proposed new "premium" listing category for state-owned companies The move though is controversial because the changes risk undoing reforms made in 2014 after a series of corporate scandals. SOUNDBITE (English) JAMES BEVAN, CHIEF INVESTMENT OFFICER, CCLA "I think the relaxation of listing rules is bad news unequivocally. We have been there before in terms of NRC and Bhumi. These were entities that raised capital had a listing in the UK and ultimately disadvantaged minority shareholders." Those scandals led to rules dictating companies must ensure that all transactions made with a controlling shareholder are conducted fairly and on normal commercial terms. But under the new proposed structure, they will not apply to sovereign-controlled companies when dealing with the parent state, as long as the government holds at least 30 percent of the shares. SOUNDBITE (English) JAMES BEVAN, CHIEF INVESTMENT OFFICER, CCLA "The rules were tightened very precisely to ensure the majority shareholders had to behave properly in the context of minority shareholders interests. Those rules are largely being waved away and it will be up to investors to mind their eye." The benefits however are very appealing. Weak crude prices are pushing various oil rich states to plan a series of asset sales. Among them Saudi, Oman and Abu Dhabi but also Romania and Greece. London wants to ride this wave of privatisations to confirm its role as a top financial hub. And in the wake of the Brexit vote, it might feel even more pressed to so.