UK stock market relocations to New York do not amount to a crisis

Looking at recent headlines, one could be forgiven that there is a host of UK-listed companies packing their bags and preparing to head to New York.

Today brought news that CRH, the world’s biggest supplier of building materials, is moving its main listing from London to New York – in the process depriving the FTSE 100 of a £29.4bn global leader.

At the same time, the betting and gaming combine Flutter Entertainment – the company formed from the merger of Paddy Power and Betfair and whose brands include Sky Betting and Gaming, PokerStars and Tombola bingo – confirmed it has begun consulting shareholders on making the same journey, revealing that feedback so far has been favourable.

Two previously UK listed companies have also recently turned their back on old Blighty.

The building materials supplier Ferguson, which used to own the builder’s merchants chain Wolseley, switched its primary listing from London to New York in March last year.

That departure came just two months after BHP, the world’s biggest mining company, moved its main listing from London to Sydney. At the time, the company was the largest in the FTSE 100.

Perhaps the most shocking headline this week, though, has concerned a movement in listing that didn’t even happen.

The Financial Times reported that Shell’s senior management considered moving its main listing and headquarters from Europe to the US in 2021 before thinking better of it.

The notion that Shell, the UK’s biggest quoted company, was even prepared to countenance moving elsewhere has startled many.

So, is this a case of ‘will the last major plc to move from London to New York please switch off the lights’?

Not necessarily.

In each of these cases there is a specific reason involved.

In the case of CRH, for example, the United States now accounts for more than three-quarters of its earnings.

It makes sense for it to move its stock listing to the US. Besides, CRH was never really a British company, anyway. It was founded in Ireland by the merger of two well established Irish companies – one dating back more than 80 years – and it has always maintained an Irish character.

Albert Manifold, its chief executive, is Irish, as was his predecessor, Myles Lee. It was jointly listed in Dublin and London and it was only as recently as late 2011 that it decided to move its main listing to the latter.

The same applies to BHP. The company never actually owned any production assets in the UK. Its presence in the UK extends to a head office near London’s Victoria station.

Even its nickname, ‘The Big Australian’, gave away where its origins were. And again, like BHP, it had not been in the UK that long, having come to London only as recently as 2001, when it merged with Billiton (itself a South African business). A lot of its Australian shareholders – and certainly the Aussie media – never wanted it to leave in the first place.

It made sense for Ferguson, too, to move. By the time it took its main listing to New York, more than 90% of its sales and profits were derived in the US, a percentage that actually increased following the demerger of Wolseley.

As for Flutter Entertainment, it too is taking on an increasingly American complexion.

The US, having abandoned its long-standing and quaintly puritanical aversion to sports betting, is where the company is seeing the fastest growth.

Peter Jackson, the chief executive, has also suggested that moving the main listing to the US would help raise the company’s profile in the country and help it sign up more US talent.

He may also feel that US investors will value Flutter more highly than their British peers. Flutter owns a fantasy sports provider called FanDuel whose primary US rival, DraftKings, has at various times in the past been valued at more than the whole of Flutter.

That higher rating was also a reason, apparently, for Shell thinking about switching from London to New York. Investor antipathy towards oil and gas companies like BP and Shell is more pronounced in Europe than it is in the United States.

Shares of Shell and BP, accordingly trade on lower stock market ratings than do their US rivals like Exxon and Chevron.

Consider this. Shell, which has just reported a profit for 2022 of $39.9bn, is currently valued at £177bn ($211bn) by the stock market. Chevron, which has just reported a 2022 profit of $36.5bn, is valued at $309bn.

All these individual moves do not yet add up to a full-blown crisis, rather a cause for concern.

As David Schwimmer, chief executive of LSEG, the parent company of the London Stock Exchange, told Sky News on Thursday: “Some companies are making decisions based on the fact that a very large percentage of their revenues may be in the US and that may be a rationale for some of the companies.”

Mr Schwimmer, who is American, insisted what is going on was nothing to do with the attractiveness of the London stock market as a place to list.

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He went on: “The pension funds in this market, it’s now clear to people, have dramatically reduced their exposure to UK equities in favour of fixed income over the last 20 years, really dramatically.

“That raises some interesting questions as to how pensions should be managed in this country and if they’re being managed in an appropriate way for their stakeholders.

“There will probably need to be a close look at that.”

Mr Schwimmer said changes to listings rules proposed by the Hill review and more recently the so-called ‘Edinburgh Reforms‘ proposed by the chancellor Jeremy Hunt had generated a lot of interest among investors.

He went on: “London continues to be the leading international financial centre – but there is more that we can do to make it more attractive.”

It is also worth pointing out that businesses come to London as well as leaving it, just as BHP did in 2001 and CRH did in 2012. The late 1990s, for example, saw a host of big South African companies moving their main listing to London, among them miners Billiton and Anglo American, South African Breweries – which used its London listing to build itself into the world’s second largest brewer – and the financial services groups Investec and Old Mutual.

The first decade of this century similarly saw a clutch of companies based in the former Soviet Union move to London, including the likes of Evraz, Polyus Gold, Polymetal, Kazakhmys and Eurasian Natural Resources (of which the less said, the better). Most of them entered the FTSE 100 at one point or another.

More recently, when Unilever tided up its complicated dual listing structure two years ago, it chose London over Amsterdam as its main listing.

So, too, did Shell. The discussions about New York were all part of a broader discussion inside the company that eventually saw it opt to make London its main listing.

So where companies choose to move their main listing is a two-way street. These relocations may appear alarming on the face of it but, quite often, there is more to it than meets the eye.

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