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Shell to quit London stock exchange listing?

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Unloved – in some quarters …

Shell seems to be putting it about that it might leave the LSE for a New York listing.  Well, it’s already listed in NY and has been for many years.  Obviously, quitting London will save on costs to some extent, but why will the share price be liberated?  If US investors value Shell that much more highly, why doesn’t this make itself felt via its NY listing price?  There’d be plenty of folk eager to exploit any arbitrage opportunity if a differential opened up.

I think we can guess the answer.  As the DTel says: “a growing focus on environmental, social and governance (ESG) measures among investors has begun to threaten [London's] status, with major [mining and energy] companies starting to defect to the US.”  By “investors” they presumably mean the London-based institutional type.  

The DTel goes on:  “It comes as Shell looks to shift its business away from oil and gas towards greener sources of energy. But its hybrid approach has risked alienating traditional investors focused on profits, while failing to appease more activist investors concerned about climate change.

I have a slightly different way of describing what’s going on.  For some while now it’s been apparent to me that the oil majors – both IOCs and NOCs – have done the sums, and concluded that renewables etc simply aren’t going to sweep them aside [the green reductio mentioned in the quote below], & that demand for the traditional oil & gas business and its products is secure for many decades to come.  The only question is: which players are going to conduct this business?

Obviously, the NOCs aren’t bowing out: in fact, starting with the most recent COP, they are becoming confidently strident on the subject.  Several years ago, when Shell, BP et al were very definitely promoting their reorientation towards ‘green’, I discerned Exxon wondering whether it really needed to change at all:  “You can see them thinking: the world will still need oil … maybe there’s a niche for just one unreconstructed old dinosaur …”:  and in 2021 I wrote

Some people are making a Great Deal of Money from this – right now. And the scope for a great deal more to be made in the coming years is huge … Even just the continued supply of simple gas to western consumers (whether the green-woke like it or not) has a lot of mileage still in it … But the ‘traditional players’ seem to feel themselves unable to make the usual response to an economic reductio ad absurdum, in terms of investment (long term) and arbitrage (short term) to take advantage of the mispriced assets etc … So: is it all simply about greenwashing? Maybe you just need the right “communications” firm in tow.  I think Shell [as well as Exxon] was hoping they could pull this one off, too. 

Traditional business

Three years on, personally I don’t think there’s much doubt left.  Exxon goes (or stays) without saying.  Shell, BP, Chevron, even Equinor! – are looking to pull off the balancing act.  If you’re only listed in NY, you don’t need to make so many of those pesky ESG declarations about how woke you are in your Annual Report**.  The company that interests me is Total: they’ve gone for a fairly comprehensive woke/green rebranding, and are certainly putting themselves about in the renewables space.  But it’s clear they haven’t remotely given up on the hard stuff, either – not least in Africa, where they seen to have been singled out by the Semtex wing of the green movement (as we noted here).

My characterisation of the current situation is that it’s to be an awkward but determined balancing act for all except the utterly unreconstructed NOCs + Exxon.  The rest are going to try to have it both ways, as best they can.  The depth and reality of the green reductio is such, there’s just too much money lost if they give up on the trad stuff they are so good at.  Switching SE listings will be just one of the many games they’ll be contemplating.



**Though, interestingly, you do need to make much more rigorous risk disclosures, US shareholders being highly litigious in these matters.  Several years ago Germany’s mighty E.on (before it split) withdrew from its NY listing – my confident explanation is and was that they didn’t like the extensive – and quantified – risk disclosures they needed to make in their US reporting about their dependence on vast and very disadvantageous Russian gas purchases.   Shell will be needing to mull that over, too.  Oh how complicated it all is! 


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