Shell threatens to quit London for New York

Shell threatens to quit London for New York

New York

Shell has threatened to quit the London Stock Exchange for New York in what would be the biggest blow to the UK’s struggling stock market to date.

Wael Sawan, chief executive of Shell, said the oil and gas giant was looking at “all options” for its listing amid concerns it was under-appreciated by investors.

He said: “I have a location that clearly seems to be undervalued.”

The comments will spark fears that Shell, which is the largest company on the FTSE 100 with a market value of roughly £180bn, could become the latest to flee the London market.

The index has traditionally been dominated by oil and gas companies, as well as mining and commodity stocks.

But a growing focus on environmental, social and governance (ESG) measures among investors has begun to threaten that status, with major companies starting to defect to the US, which is now the world’s largest oil producer.

Mining giant Glencore last year chose to spin off and list its coal business in New York rather than London, while its secondary listings went to Toronto and Johannesburg.

Any decision to shift Shell away from London would fuel concerns that Glencore could move its remaining listing to the US – an option that has already been mooted by analysts.

Rival energy giant BP, which is the fifth-largest company on the index, could also follow suit.

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.

Mr Sawan said he was focused on a two-and-half-year turnaround plan, which he dubbed a “sprint”, aimed at slimming down the company and boosting its valuation.

Shell is aiming to reduce operating costs by up to $3bn (£2.4bn) by the end of next year, lower its capital expenditure range to between $22bn and $25bn and target shareholder returns via dividends and buybacks of up to 40pc of cash flow.

The energy boss said the current undervaluation presented a “fantastic investment opportunity”, adding: “I will keep buying back those shares, and buying back those shares at a discount.”

But he pointed to the gap in valuation between Shell and its New York-listed rivals Exxon Mobil and Chevron and acknowledged the company may have to take more drastic action if that gulf is not resolved by the end of next year.

Mr Sawan told Bloomberg: “If we work through the sprint, and we are doing what we are doing, and we still don’t see that the gap is closing, we have to look at all options.”

Any decision to move Shell’s primary listing away from London would need to secure at least 75pc approval in a shareholder vote.

It comes only three years after Shell scrapped its dual listing structure, moved its headquarters from the Netherlands to the UK and ditched “Royal Dutch” from its name. At the time, the move was hailed as a vote of confidence in Britain.

Yet a string of disappointing initial public offerings and investor pessimism over the UK economy has sparked an exodus of companies across a range of sectors.

Chip giant Arm, building materials supplier CRH, Paddy Power owner Flutter and travel operator Tui are among companies to have abandoned London in recent months.

The stampede away from the London stock market has accelerated this year, with investors withdrawing more money from UK stock market funds.

Investors pulled $6.5bn (£5.1bn) from UK-focused equity funds for the period January 1 to April 3, according to Goldman Sachs, adding to the gloom.

The FTSE 100 has also been sluggish over the same period compared to global rivals.

Stock markets in Japan, the US and EU have rallied by more than a quarter, while the FTSE 100 rose just 8.6pc over the same period, according to Calastone.

UK stock funds have been unloved for several years, suffering 34 consecutive quarters of net selling, according to Calastone. Another £823m left funds in March.

Broaden your horizons with award-winning British journalism. Try The Telegraph free for 3 months with unlimited access to our award-winning website, exclusive app, money-saving offers and more.