Shell Considering Switching ‘Undervalued’ Listing From London to New York

Shell May Move ‘Undervalued’ Listing From London to New York

April 10, 2024 TruthUSA

The departure of the most valuable listed company in the UK could trigger similar moves by other London Stock Exchange giants, including BP and Glencore.

The UK’s most valuable company is contemplating leaving the “undervalued” London stock market for New York, a decision that could negatively impact Britain’s financial services sector.

Former and current Shell executives have indicated that transferring the company listing to the New York Stock Exchange (NYSE) is a possibility.

Addressing the disparity in stock market valuations between London-listed Shell and its NYSE-listed counterparts like Exxon Mobil Corp. and Chevron Corp., Shell CEO Wael Sawan told Bloomberg, “I have a location that clearly seems to be undervalued.”

Shell’s free-cash-flow (FCF) yield, which measures the cash generated from a company’s core operations relative to its valuation, exceeds 12 percent. In comparison, Exxon’s FCF yield is under 7 percent, and Chevron’s average is 6.5 percent. A high FCF yield could indicate undervalued shares.

Mr. Sawan stated that the company will explore all options if his efforts to boost Shell shares fall short.

With his leadership, the company is focused on narrowing the valuation gap through cost reductions and share buybacks. Mr. Sawan refers to this improvement plan as a “sprint” of ten quarters.

Positive Attitudes

Adding to the NYSE’s attractiveness is the favorable approach toward traditional energy companies, as noted by former Shell CEO Ben van Beurden.

Speaking at the FT Commodities Global Summit in Switzerland, Mr. Van Beurden highlighted the “more positive” attitudes in the US, making European listings less appealing.

“All these factors work against those listed in Europe,” he said, emphasizing that Shell was “significantly undervalued.”

The company explored various options when it left the Netherlands in 2021, eventually consolidating its headquarters in London.

“We thought that moving to the UK was the most logical step. Was it the final move? You always have to consider what other options are available,” Mr. Van Beurden explained.

In an interview with the BBC in July of last year, Mr. Sawan highlighted the warm reception from the NYSE.

“The welcome we received there was exceptional. The Shell flag was flying alongside the New York Stock Exchange flag. They expressed appreciation for a company that provides critical energy resources. As someone from Lebanon, where energy is scarce, this resonated with me,” the Shell CEO remarked.

Shifting the primary listing to New York would necessitate approval from Shell’s shareholders holding over 75 percent of shares. The process could impact the valuation early on in the transition.

Mr. Sawan indicated that relocating the headquarters is “not a priority for the next three years.”

“I never rule out any possibility that could create favorable conditions for the company and its shareholders. Ultimately, my focus is on shareholder value,” he concluded.

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