Exiting London’s stock market won’t cure Shell’s share price woes – The Irish Times

Shell, the largest company on the London Stock Exchange, has hinted it could leave Britain for a US listing, but could this really solve its valuation problems?

Ex-Shell boss Ben van Beurden recently suggested the company could benefit from a transatlantic move, saying Shell was “vastly undervalued” in London.

Current Shell chief Wael Sawan apparently agrees, saying he has “a location that appears clearly undervalued,” adding that the company “needs to look at all options. All options”.

A Shell departure would be a major blow to the London market, which has already lost companies such as CRH, Flutter and Ferguson to the US.

British chip designer Arm Holdings’ recent decision to go public in the US adds to the image of a market in decline. The US is a liquid and highly valued market.

Shell is noticeably cheaper than American rivals such as Exxon Mobil and Chevron. The company’s market capitalization would rise by more than 40 percent from around £180 billion to £260 billion if it were valued in the same way as Exxon, notes Dan Coatsworth of AJ Bell.

However, an American stock exchange listing would not magically eliminate this valuation difference. Unlike a plumbing company like Ferguson, a large company like Shell has no trouble attracting the attention of American investors.

Most Shell investors are already based in the US. Shell’s lower valuation reflects investors’ doubts about renewables, not London.

Exxon and Chevron are more expensive because they invest more heavily in oil than Shell, which in turn is valued more highly than BP due to the latter’s greener focus. Shell executives probably know this too, and may think that a US stock exchange listing would make it easier to scale back their green efforts. In any case, an American stock exchange listing alone is not a panacea.