Britain's financial regulator is paving the way for Saudi Aramco's IPO -- the biggest in history

Saudi Arabia’s King Salman. Photo: Jefta Images / Barcroft Images / Barcroft Media via Getty Images

LONDON — Britain’s Financial Conduct Authority proposed on Thursday a series of new rules around stock market listings in the UK that could pave the way for Saudi state oil giant Aramco to bring part of its record-breaking initial public offering to London.

Under new proposals, the regulator would create a new category “within its premium listing regime” for sovereign-owned companies looking to enter the market.

“Regulatory protections for investors lie at the core of the listing regime. However, it is important that these protections remain well-targeted,” said Andrew Bailey, the FCA’s chief executive, in a statement.

“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 recognised this and capital markets are well adapted to assess the treatment of other investors by sovereign countries,” he said.

Saudi Aramco plans to list 5% of the company publicly in an IPO worth between $US50 billion and $US100 billion — making it the world’s biggest by market capitalisation. However, current UK rules would make it difficult for the company to list on the London Stock Exchange as currently premium listings include the requirement that 25% of a company’s shares are floated on the exchange.

Saudi Arabia is due to list shares in the company, valued by officials at around $US2 trillion, in both Riyadh and at least one other foreign stock exchange by 2018.

London is vying with other financial centres such as New York, Hong Kong, Toronto, and Singapore to play host to the float. Saudi Arabia appointed JPMorgan, HSBC and Morgan Stanley to manage and advise on the deal.

The shares’ valuation has been the subject of intense debate because the company is yet to disclose financial details such as sales or profits.

Deputy Crown Prince Mohammed bin Salman, who is in charge of the Saudi Arabia’s economic policy, has said the IPO will value Aramco at $US2 trillion or more, which is around two-thirds the size of the entire London Stock Exchange.

But, according to Financial Times estimates, the correct valuation should be no more than $US1.1 trillion.

Britain is lobbying Saudi Arabia hard to attract the listing, with LSE boss Xavier Rolet accompanying Theresa May on a recent visit to the Gulf state.

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