(News Bulletin 247) – Totalenergies last week raised the possibility of choosing New York for its main listing. Several European groups have already chosen the American market, either also for their main listing, or even for their sole listing.

The announcement stirred up the little world of the Stock Exchange for several days: Totalenergies is considering making New York its main listing. The group’s CEO, Patrick Pouyanné, explained that the company’s board of directors had asked him to consider this option and that work with this in mind would be completed by next September.

If this announcement obviously does not send a good signal about the attractiveness of the Parisian market, Totalenergies is not an isolated case in Europe, far from it. Several groups have chosen New York for their main or even sole listing.

At the beginning of the month, Bloomberg opinion also pointed out that another oil major, Shell, was studying “all options”, including, possibly, moving its listing to New York and leaving London. The agency cited Shell CEO Wael Sawan. This is not the company’s project at the moment, but the option could come on the table if the valuation gap with the American majors persists beyond mid-2025, the manager explained to Bloomberg .

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Several examples

A British group has already taken the step mentioned by Totalenergies: Ferguson. This company was formerly called Wolseley (until 2017) and specializes in the distribution of sanitary products, heating and pipes. The company had decided to transfer its main listing to New York in 2022, while remaining listed in London. A year later, in an interview with the Financial Times, its managing director, Kevin Murphy, explained that he had “no regrets” about this decision, while his financial director, Bill Brundage, indicated that American investors had moved from ‘a little more than 30% of the capital, more than 50%. Conversely, the British saw their share drop from 60% to around 30%.

The Irish CRH, a construction materials group, undertook the same initiative, last September devoting New York as its main listing location and no longer London where it retained a secondary listing (it removed it however in Dublin).

Originally British (it was also listed in London before being bought by Softbank in 2016), the computer chip technology specialist Arm chose Wall Street rather than London for its return to the stock market last September.

The London market is not the only one to suffer this type of setback. The industrial gases specialist Linde, a major competitor to our national champion Air Liquide, had inflicted a resounding snub on Frankfurt, by abandoning the German market in March 2023 to focus on its listing in New York. Linde was quite simply the largest group on the Frankfurt Stock Exchange in terms of market capitalization (it is now SAP).

Latest example: the German specialist in high-end sandals Birkentstock which decided, like Arm, to go public not in its country of origin, but in New York, in October. The first day of trading did not go very well.

Getting closer to the world’s largest market

Why do these groups prefer Wall Street? As Shell’s CEO explained to Bloomberg, executives may believe that an American listing can help narrow the valuation gap with their American peers.

The desire to get closer to the world’s largest market, and thus seek money where it is, can also play a role. According to UBS, the United States represents 60.5% of the world market in terms of market capitalization, far ahead of Japan (6.2%).

Asked to react to Totalenergies’ New York reflection, the Minister of the Economy, Bruno Le Maire, also made a somewhat terse but clear statement. “There is no money in Europe,” said the tenant of Bercy on LCI, judging that Totalenergies’ observation regarding the greater interest of American shareholders in its action was “lucid”.

“The United States remains the leading stock market in the world, and it is clear that there may be significant interest for European listed groups which have significant activity in this country to get closer to this market. For others it “is less obvious”, explains Pascal Quiry, professor of finance at HEC and co-author of the Vernimmen stock market newsletter.

To return to the previous examples, Ferguson sold its British activities in 2021 and ensured in 2022 that “100% of its operations were focused on North America”. Hence the logic of a main listing in New York.

Seek a wider pool of shareholders

CRH for its part explained that three-quarters of its gross operating profit (Ebitda) now came from North America. The company believed in June 2023 “that a primary listing in the United States would provide (it) more commercial, operational and acquisition opportunities, further accelerating (its) successful integrated solutions strategy.” The group also judged that this decision would give it access to an “extended pool of investors” particularly from American investment funds and individual shareholders.

Linde’s case is a little more specific. The group had greatly increased its exposure to the American market (the “Americas” represented 43% of sales in 2023) via its merger with the American Praxair in 2019. The German company had also mentioned a certain heaviness with the listing in Frankfurt.

“Although the dual listing structure has served us well from the beginning, it has limited the valuation of our shares due to European restrictions and increased complexity,” explained the company in 2022. The problem came from a rule preventing Linde from weighing more than 10% of the DAX, Frankfurt’s benchmark index, while its capitalization was skyrocketing. What kicked him out of the DAX 40…

Totalenergies, for its part, invoked the interest of its American shareholders who hold nearly 50% of the capital and tend to buy the stock when Europeans sell or maintain their stakes. “It’s sad because it’s probably the major that has put the most resources and ambitions into renewable energies,” regrets Pascal Quiry.

Taxation in Europe in question

The academic also mentions a regulatory framework that is not conducive to investment in shares in Europe to explain the attraction of European groups for Wall Street.

“If you look in France, the tax advantages given to life insurance, invested mainly in debt securities, are greater than for the stock savings plan. The consequence is that you have local French investors who mainly buy bonds and not shares, which results in a lower valuation”, develops Pascal Quiry.

“And throughout Europe we have roughly the same situation as in France, with the notable exception of Sweden. The regulations are more incentive-based on shares, pension funds are therefore invested in shares , and the Swedish market is more dynamic, in proportion than the French”, continues the academic.

“In the United Kingdom, there was a regulatory reform which resulted in a clear reduction in the equity component of pension fund portfolios,” he explains.

However, according to him, we should not make a few examples into generalities. “One swallow does not make spring and we must not sound the alarm wrongly. I remind you that Coty came to be listed in Paris last year,” argues Pascal Quiry.