Shell, the biggest company on the London Stock Exchange, is hinting it may quit the UK for a US listing, but would this really cure its valuation woes?
Ex-Shell boss Ben van Beurden recently suggested the company might benefit from a transatlantic move, saying Shell was “massively undervalued” in London.
Current Shell chief Wael Sawan seemingly agrees, saying he has “a location that clearly seems to be undervalued”, adding the company must “look at all options. All options”.
A Shell departure would be a major blow to the London market, which has already lost companies like CRH, Flutter and Ferguson to the US.
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British chip designer Arm Holdings’ recent decision to list in the US adds to the image of a market in decline. The US is a liquid and highly valued market.
Shell is noticeably cheaper than US rivals like Exxon Mobil and Chevron. The company’s market capitalisation would swell over 40 per cent from around £180 billion to £260 billion if valued like Exxon, notes AJ Bell’s Dan Coatsworth.
However, a US listing would not magically erase this valuation differential. Unlike a plumbing company like Ferguson, a huge business like Shell has no problem attracting the attention of US investors.
Indeed, most Shell investors are already US-based. Shell’s lower valuation reflects investor doubts about renewables, not London.
Exxon and Chevron are pricier as they are more heavily invested in oil than Shell, which in turn is more highly-valued than BP due to the latter’s greener focus. Shell executives presumably know as much, and may believe a US listing would make it easier to reduce their green efforts. Either way, a US listing alone is no cure-all.
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