Shell and Total Energies are considering moving their stock listings to the US to match higher valuations enjoyed by American oil majors.
However, US broker Jefferies has analysed the data and suggests that a listing change alone may not bridge the valuation gap with US counterparts.
Jefferies notes that US companies trade at significant premiums over European ones — 49% on a forward PE basis and 48% on forward FCF yield — highlighting the attractiveness of a US listing.
But achieving a higher rating might hinge on inclusion in major US equity indexes like the S&P 500 or Russell 1000, which is a challenging process due to stringent criteria related to the company’s domicile, including primary listing location and the proportion of US assets and revenues.
Switching to a US listing could also lead to short-term downsides. For instance, shareholders unable to hold US-listed shares might sell off, and the company could be removed from domestic European indexes before securing a spot in US indexes.
Furthermore, Jefferies mentions that Total Energies and Shell have significant presences in the CAC 40 and FTSE 100, respectively, which could complicate re-listing efforts. Additionally, European governments may resist a complete re-listing, although maintaining a secondary listing in their home country could be a more feasible initial strategy.
"Moving a primary listing to the US would also cause a near-term headwind for the share price: shareholders that are unable to hold US-listed shares will have to sell down and, more importantly, a change in primary listing could cause companies to be dropped from their domestic / European indexes before being admitted into US indexes."
Jefferies mentioned that Total Energies and Shell have significant presences in the CAC 40 and FTSE 100, respectively, which could complicate re-listing efforts.
Additionally, European governments may resist a complete re-listing, although maintaining a secondary listing in their home country could be a more feasible initial strategy.