Shell, the largest company on the London Stock Exchange, has hinted at the possibility of withdrawing from the UK and listing in the US, but will this really solve the company’s valuation problems?
Former Shell boss Ben van Beurden recently said Shell was “significantly undervalued” in London and suggested the company could benefit from a transatlantic move.
Shell’s current chief executive Wael Sawan seems to agree, saying his base “seems to be clearly undervalued” and that the company “needs to consider all options”. Yes,” he added. All options.”
Shell’s departure will be a major blow to the London market, which has already lost companies such as CRH, Flutter and Ferguson to the US.
The recent decision by British semiconductor design company Arm Holdings to list in the United States further reinforces the impression that the market is in decline. The US is a highly liquid and valuable market.
Shell is clearly cheaper than U.S. rivals such as Exxon Mobil and Chevron. AJ Bell’s Dan Coatsworth says that if the company were valued like Exxon, its market capitalization would rise by more than 40%, from around 180 billion pounds to 260 billion pounds.
However, this difference in valuation will not magically disappear even if a company goes public in the United States. Unlike plumbing companies like Ferguson, giants like Shell have no problem attracting the attention of U.S. investors.
In fact, most of Shell’s investors are already based in the United States. Shell’s valuation decline reflects investor skepticism about renewable energy, not London.
Exxon and Chevron have higher stock prices because they invest more in oil than Shell, and as a result, the latter is valued more highly than BP because it is more environmentally friendly. Shell executives probably know that much and may believe that going public in the U.S. will make it easier for them to reduce their environmental efforts. In any case, listing in the US alone is not a panacea.
