Shells Contemplating Transitioning ‘Undervalued’ Listing to New York
The departure of the most valuable listed company in the UK could trigger a chain reaction among other London Stock Exchange giants, such as BP and Glencore.
The UK’s most valuable company is contemplating the idea of leaving the London stock market, which it perceives as “undervalued,” in favor of listing in New York. This potential move could have negative implications for Britain’s financial services sector.
Former and current Shell executives have hinted that shifting the company’s listing to the New York Stock Exchange (NYSE) is under consideration.
Commenting on the valuation gap between London-listed Shell and its NYSE-listed competitors like Exxon Mobil Corp. and Chevron Corp., Shell CEO Wael Sawan stated, “I have a location that clearly seems to be undervalued.”
Shell’s free-cash-flow (FCF) yield is over 12 percent, while Exxon trades under 7 percent and Chevron’s average is 6.5 percent. A high FCF yield may indicate that the company’s shares are undervalued.
In an interview with Bloomberg, Mr. Sawan suggested that the company will explore all options if his efforts to boost Shell’s shares do not succeed.
Under Mr. Sawan’s leadership, Shell is working on narrowing the valuation gap by reducing costs and repurchasing shares, referring to this improvement plan as a “sprint” lasting ten quarters.
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“You can worry about the gap—or you could buy the gap. I will keep buying back those shares, and buying back those shares, at a discount. That’s a fantastic investment opportunity,” he emphasized.
If the strategy fails to yield results and the valuation gap remains wide open, Shell may explore the option of relocating to the United States.
If the oil giant decides to make the move in the future, it could significantly impact Britain’s financial sector.
Shell has historically held the position of the most valuable company on the London Stock Exchange (LSE), with the top spots currently occupied by AstraZeneca, HSBC, Unilever, and BP.
According to Bloomberg, Shell’s potential departure could add pressure on BP to also consider transferring its listing to New York. A similar scenario may unfold for Glencore Plc, one of Britain’s largest natural resource companies and the tenth most valuable company in the UK.
Positive Attitudes
Former Shell CEO Ben van Beurden pointed out that the favorable attitudes towards traditional energy companies in the United States make listing in Europe less appealing.
During the FT Commodities Global Summit in Switzerland, Mr. van Beurden explained that the more positive sentiment in the US made Europe less attractive for listings.
“All these factors work against those listed in Europe,” he remarked, noting that Shell was significantly undervalued.
When Shell relocated from the Netherlands to London in 2021, various options were considered before consolidating its headquarters in the UK.
“We believed that moving to the UK was the most logical next step. Would it be the end game? You always have to reassess what other options are available,” Mr. van Beurden stated.
“The welcome we received there was exceptional. The Shell flag was flying alongside the New York Stock Exchange flag. They conveyed that they value a company that supplies us with the vital energy we need. That resonated with me as someone from Lebanon, where energy scarcity is prevalent,” said the Shell CEO.
Should Shell decide to make New York its primary listing, the approval of shareholders owning over 75 percent of shares would be required. The transition process could also impact valuation during its initial stages.
“I would never rule out anything that could potentially create the right conditions for the company and its shareholders. Ultimately, I am committed to enhancing shareholder value,” he added.
