Shell, the most sizeable firm on the London Stock Exchange, is indicating a potential shift to the US for listing, despite it not certain to rectify its valuation tribulations. Ex-Shell head, Ben van Beurden, has insinuated that the corporation could profit from a move across the Atlantic, stating that the firm is significantly undervalued in the London market.
Present Shell leader, Wael Sawan, seems to concur, mentioning an undervalued site and the need to consider every available option. A potential relocation of Shell could deal a significant blow to the London stock market, following the departure of companies such as CRH, Flutter, and Ferguson to the US territories.
The recent decision of UK’s Arm Holdings to list in the US further paints a grim picture of a declining market. The American market is fluid and holds high values. Shell’s valuation is considerably less than its American counterparts, such as Exxon Mobil and Chevron. If Shell were to be assessed like Exxon, its market capitalisation could surge by over 40 per cent, as mentioned by AJ Bell’s Dan Coatsworth.
A possible US listing, however, is not an instant solution to this valuation gap. Unlike Ferguson – a plumbing business, a vast entity such as Shell doesn’t struggle to draw attention from US investors. In fact, most of Shell’s investors are from the US. Shell’s lower valuation mirrors investors’ scepticism about renewables rather than London. Exxon and Chevron are high-priced due to their extensive involvement in oil, making Shell comparatively more highly-valued than BP because of the latter’s focus on green technology. Shell bosses are aware of this and possibly think that a US listing might ease their efforts in appearing green. Regardless, solely listing in the US is not a panacea.