Two of Europe’s largest oil companies, Shell and TotalEnergies, are considering moving their stock exchanges to Wall Street, potentially dealing a major blow to London and Paris. Both companies, representing significant portions of their local stock markets, have expressed frustration with the low valuation of their shares compared to US counterparts such as Exxon Mobil and Chevron. The idea of moving their listing to US exchanges has been floated as a way to access a larger pool of capital, as companies listed in the US tend to have higher valuations.
The price-to-cash flow ratios of TotalEnergies and Shell are significantly lower than those of US oil majors, indicating that their stocks may be undervalued. European and US stocks have seen a widening gap in valuation over the past two years, leading energy companies like Shell and TotalEnergies to consider relocating to the US where investors are more willing to buy shares. TotalEnergies’ CEO Patrick Pouyanne has stated that the company is actively exploring a move to New York, while Shell’s CEO Wael Sawan has expressed concerns about the undervaluation of the company compared to its US competitors.
While moving to Wall Street is not currently a live discussion for Shell, the company has announced a $3.5 billion share buyback to increase the value of its stock. The potential departure of Shell from London has raised concerns about the impact on the city’s stock exchange, as several companies have already relocated their listings to other cities in recent years. If Shell and TotalEnergies were to leave their respective home markets, it could spark a crisis for both London and Paris, with potentially significant implications for the FTSE 100 index.
The focus on climate commitments and ESG issues in Europe has put pressure on integrated energy companies to prioritize sustainability, which may be a contributing factor to discussions about relocating to the US. Former Shell CEO Ben van Beurden emphasized the importance of demonstrating value in Europe despite the undervaluation of the company’s stock. While the probability of Shell and TotalEnergies moving to Wall Street is low, there are advantages to maintaining ties to their home countries, suggesting that the decision may not be imminent.
Despite the possibility of Shell and TotalEnergies leaving their home markets for Wall Street, companies like BP are focused on improving their business performance rather than relocating. BP’s lower-than-expected profit for the first quarter reflects challenges in the oil and gas industry, but the company’s CEO has stated that a move away from London is not currently on the agenda. The potential impact of Shell’s departure on the FTSE 100 index and the broader implications for global stock markets are being closely monitored by analysts and investors.
