According to a recent analysis, the valuation of some of London’s biggest listed companies could double if they moved to New York. This highlights the benefits for companies who are considering moving their listings from the UK.
AJ Bell’s funds platform found that Shell, Diageo, and British American Tobacco would see their market cap increase if their shares are priced based upon the same multiples of earnings as their New York listed peers.
BAT, the tobacco giant, is worth approximately £52.9 billion. This represents a discount of 56% compared to its US competitor Philip Morris. The UK-listed company would be worth £121 Billion if it moved to the US.
Shell’s value could rise from £186 billion (roughly £238 billion) to £238 by moving to the US based on ExxonMobil’s earnings multiplier.
Diageo’s, the drinks company behind brands like Johnnie Walker and Guinness, could see a 25% increase in profits, going from £63.5 to £84.6.
London’s appeal as the home of major global companies is under scrutiny now that several companies either have moved their listings abroad or are considering it. Flutter Entertainment (the gambling group behind Paddy Power) will vote on proposals to leave London’s FTSE 100 and list in New York at its annual meeting next week.
Shell’s chief executive Wael Sawan said earlier this month that he is open to changing Shell’s primary listing from New York to New York in order to close the valuation difference with US peers.
Since the beginning of this year, American buyers have made several bids on FTSE 250 constituents, including Spirent Communication, Wincanton, and Tyman.
According to Dan Coatsworth of AJ Bell, an investment analyst, changing a company’s listing to New York is “not a magical move that will make a firm’s valuation shine”.
He added that other factors, such as the rate at which a company’s sales and profits are growing, as well the type of business a firm is involved in, can have an effect.