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

Shell CEO Wael Sawan speaks at the panel dicscussion during the Abu Dhabi International Petroleum Exhibition and Conference held at ADNEC Exhibition Center on Oct. 2, 2023. Ryan Lim/AFP via Getty Images

The UK’s most valuable company is considering leaving the “undervalued” London stock market for New York, a move that could be detrimental to Britain’s financial services sector.

Former and current Shell bosses have signalled that switching the company listing to the New York Stock Exchange (NYSE) was not off limits.

Commenting on the gap between stock market valuations for the London-listed Shell and its NYSE-listed rivals, such as 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—a ratio between the cash generated from the core operations of a company relative to its valuation—is higher than 12 percent. In contrast, 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.

Mr. Sawan indicated that the company will “look at all options,” should his plan to bolster Shell shares flop.

Under his leadership, the company is working to narrow the valuation gap by cutting costs and buying back shares. Mr. Sawan has called this improvement plan a “sprint” of ten quarters.

“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 said.

If the strategy doesn’t deliver and the valuation gap doesn’t show signs of closing, Shell will consider all options, which means a possible move to the United States.

Should the oil giant decide to move across the pond in the future, the impact to Britain’s financial sector could be considerable.

Shell has long been the most valuable company on the London Stock Exchange. The top five spots are taken by AstraZeneca, HSBC, Unilever, and BP.

According to Bloomberg, Shell’s departure would increase pressure on BP to switch its listing to the New York. A similar scenario could unravel for Glencore Plc, one of the world’s largest natural resource companies and the tenth most valuable company in Britain.

Positive Attitudes

Adding to NYSE’s appeal is the attitude toward conventional energy companies, according to the former Shell boss Ben van Beurden.

Speaking at the FT Commodities Global Summit in Switzerland, Mr. Van Buerden said that  “more positive” attitudes in the United States made listing in Europe less attractive.

“All these factors conspire against the people listed in Europe,” he said, adding that Shell was “massively undervalued.”

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

“We thought that going to the UK was the most logical next step. Was it going to be the end game? You always have to reconsider what other options are there,” Mr. Van Beurden said.

Speaking to the BBC in July last year, Mr. Sawan said stressed that Shell has received a warm welcome from the NYSE.

“The welcome we had there was exemplary. The Shell flag was waving next to the New York Stock Exchange flag. They said we continue to value a company that provides us the energy we desperately need. That resonated with me as a person who comes from Lebanon, where we are starved of energy,” the Shell CEO said.

Switching the primary listing to New York would require the consent of Shell’s shareholders, holding more than 75 percent of shares. The process could also affect the valuation during the early stages of the switch.

According to Mr. Sawan, a move of headquarters is “not a priority for the next three years.”

“I would never rule out anything that could potentially create the right circumstances for the company and its shareholders. Ultimately, I am in the service of shareholder value,” he added.