The headquarters of TotalEnergies, located in La Dé fense business district near Paris, was photographed in February 2022. Chesnot/Getty Images/File London CNN SHEL (UK) is the second largest company in the FTSE 100 index in London, accounting for 8.4% of its total market value, while TTE (France) is the fourth largest company in the CAC 40 index, accounting for 6% of its total market value.
Although both companies are local heavyweights, they have recently expressed disappointment at the low value of their shares compared with the American oil giants, and put forward the idea of listing overseas.
On Friday, August 12, 2022, the FTSE stock index board in the atrium of the London Stock Exchange Group Office. Julia Hoggett, CEO of London Stock Exchange Plc, said that although many exchanges around the world felt the slowdown this year, the IPO channel in London remained strong. Photographer: Jose Samento matos/Bloomberg via Getty Pictures Jose Samento matos/Bloomberg/Getty Pictures Related Articles As companies fall to Wall Street, London is worried about its future. The ratios of share price to cash flow of Total Energy and Shell are 4.7 and 5.2 respectively, while the ratios of share price to cash flow of ExxonMobil (XOM) and Chevron (CVX) are 8.4 and 7.6 respectively. The lower the ratio, the more likely the stock is undervalued.
Alastair Syme, managing director of global energy stock research at Citi, said that the share prices of Shell and Total Energy have been discounted for a long time. But this gap reached its maximum about two years ago, reflecting the wider differences between European and American stock markets.
He told CNN that companies listed on American exchanges can get a bigger pool of funds. Syme said it would be "much more comfortable" for investors to buy European energy companies if they were part of the more valuable S&P 500 benchmark index.
Patrick Pouyanne, CEO of TotalEnergies, said last month that his oil company was "seriously" exploring the relocation of its listing location to new york and would discuss with its board of directors "a pragmatic way forward" in September.
He told analysts by phone: "We discussed with the board of directors (listing in the US)." . "Obviously, in the fields of energy and oil and gas, American shareholders are buying stocks, while European shareholders are buying in different ways."
Meanwhile, Shell CEO Wael Sawan told Bloomberg in March that his company was "undervalued" compared with Chevron and ExxonMobil. He said that if, after various efforts to improve the value of its stock, "we still don't see the gap narrowing, we must consider all options."
On a earnings conference call with analysts last week, Sawan said that moving to Wall Street was "not a live discussion at the moment", adding that Shell focused on repurchasing shares to help improve its value. The company announced on Thursday that it would buy back .5 billion of shares in the next three months.
London is depressed.
Still, the slightest sign that Shell may consider leaving London will make the city's troubled main stock exchange uneasy.
In recent years, some companies have moved from London Stock Exchange to other cities or listed in new york. Among them are British chipmaker Arm, which won the largest initial public offering in 2023 when it went public on NASDAQ in new york in September.
Chris Beauchamp, chief market analyst of trading platform IG, said that the withdrawal of Shell and Total Energy would "trigger a full-scale crisis" for their domestic stock markets, especially the London stock market.
"(Shell's departure) will deal a heavy blow to the FTSE 100 index. Losing such a company will only support the view that there is basically only one stock market in the world, namely the United States, and everything else is an afterthought.
If Shell goes bankrupt, BP, the sixth largest component of the FTSE 100, may follow. "If Shell's valuation [after new york's re-listing] rises significantly, they may consider it," said Syme of Citi.
BP's first-quarter profit on Tuesday was lower than expected, at .7 billion, down 45% from the same period last year, partly due to the drop in oil and gas prices.
Murray Auchincloss, CEO of BP, said on Tuesday that the company is concerned about the performance of its business, not leaving London.
"This is not on our agenda. We just focus on quarterly delivery, "he told Reuters.
climatic factor
Lindsay Stewart, director of investment management research at Morningstar, told CNN that the idea of re-listing Total Energy in new york not long ago was "unthinkable".
He added that the current discussion reflects that European shareholders "put pressure on integrated energy companies (in Europe) to take a different approach to climate commitments and other (environmental, social and governance) issues than the United States."
Last month, Ben Feiboden, former CEO of Shell, said that the company was "seriously underestimated", but it did not give up hope of staying in London.
"We must continue to show what we, as European oil and gas companies, have to offer for the future," he said in a discussion at the Financial Times Commodity Summit in Switzerland. . "Energy transformation is actually a huge value opportunity, not some kind of green cost that we have to pay because we happen to be in Europe."
Syme of Citigroup said that it is very unlikely that Shell and Total Energy will eventually jump ship.
"Being associated with a country has some advantages," he said, pointing out that some global energy producers prefer to fly several flags in their industrial sites-not just the stars and stripes.