BREAKINGVIEWS-Europe-US relisting trend: $1 trln more in store

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Aimee Donnellan

DUBLIN, Jan 8 (Reuters Breakingviews) - That dripping sound you hear is the steady trickle of European stock listings moving across the Atlantic. The causes vary, but by far the most logical reason for choosing an American trading venue is that a company already makes most of its money there. On that basis, there could be another flurry of re-listings in the pipeline - around $1 trillion worth, representing 8% of the key benchmark STOXX Europe 600 Index.

The hop across the pond is increasingly common. In 2022, $44 billion plumbing supplier Ferguson FERG.N switched its London listing to New York. The following year, $86 billion Irish cement giant CRH CRH.N and $39 billion gambling firm Flutter Entertainment made similar plans. Industrial, gas and engineering company Linde de-listed from the Frankfurt bourse too.

The trend hasn't slowed. Patrick Pouyanné, CEO of France’s TotalEnergies TTEF.PA, in 2024 flirted with the idea of making the U.S. the energy group's primary venue, and last month took the less radical step of upgrading its American Depositary Receipts into ordinary shares. Investors in UK equipment-rental firm Ashtead AHT.L last summer approved plans to adopt a primary New York listing, which will take effect this year. Wise WISEa.L, the $12 billion London-based foreign exchange group, is on roughly the same journey. And $294 billion AstraZeneca AZN.L recently unveiled plans to list its shares directly in New York rather than using depositary receipts, which could arguably function as a first step along the path to a primary venue switch away from Britain.

From a European perspective, it's a concerning trend - and not just for capital-markets bankers in London and elsewhere, who stand to lose fees. Oftentimes companies already have listings on both sides of the Atlantic, in which case pondhopping effectively means switching the choice of primary venue from Europe to the United States. Doing so arguably preludes a shift of the company's decision-making centre of gravity, not least because having an American headquarters and primary listing can play into whether a group qualifies for the widely tracked S&P 500 Index.

Politicians are worried, potentially fearing lower revenue from share-trading taxes and a loss of influence over strategic companies. French President Emmanuel Macron said he would not be happy if Total moved stateside. UK Prime Minister Keir Starmer held meetings with AstraZeneca to try to convince it to stay put. In November, his finance minister Rachel Reeves unveiled a plan to offer tax relief on buying shares in the UK for three years, in what looked like an attempt to boost the appeal of the London Stock Exchange.

Most of the companies that have moved their primary listings, so far, have been U.S.-focused businesses. True, founder-friendly governance norms and deeper liquidity seem like a pull factor for Wise. But the rest were largely aligning their trading venue with their most important market. Shortly before the move, North America accounted for the entirety of Ferguson’s EBITDA and 75% of CRH’s, for example. Ashtead in 2024 said it made 98% of its operating profit in North America. Linde has a giant American business, and already had a U.S. listing when it dropped the Frankfurt one. In other words, the pondhoppers have largely been stateside businesses attempting to remove the historical oddity of having a stock that trades elsewhere.

For Europeans, that might sound like cause for comfort. It's not. The sheer size of the U.S., and its superior growth rate, mean that a large number of European groups now rely on the world's largest economy for the majority of their sales. FactSet data, based on the most recent published annual numbers or figures provided by the companies, shows 32 members of the STOXX Europe 600 Index where American revenue exposure is greater than 50%. Some, like Ashtead and Carnival, are already moving their listings or dropping European ones. Others, like Deutsche Telekom DTEGn.DE, would probably never leave thanks to a local state shareholder. Breakingviews excluded these likely never-movers, narrowing the list down to 24, with a combined market value of about $1 trillion.

Notable names include $48 billion Universal Music UMG.AS, currently listed in Amsterdam, and $76 billion London-traded science and data group RELX REL.L, which both just about made the list with 50% U.S. revenue exposure, according to the FactSet data. RELX told Breakingviews it reviews its listings from "time to time" but has no plans to make any changes. Higher proportions, closer to 70%, came from $42 billion Experian EXPN.L, $9 billion education outfit Pearson PSON.L and $14 billion Fresenius Medical Care FMEG.DE. Many already have U.S. shares trading as depositary receipts.

Big Pharma groups also feature prominently, including Denmark’s $254 billion Novo Nordisk NOVOb.CO, Britain's $105 billion GSK GSK.L and $50 billion Dutch biotech Argenx ARGX.BR. Argenx told Breakingviews it has no plans to delist from the Euronext. Drugmakers proved politically sensitive in the pandemic, and many governments have takeover rules that would stop a foreign bid for some of these names. But it's not clear that European states could stop CEOs from leaving of their own accord. AstraZeneca reveals the risk - and also shows that the list could grow. The United States is less than half of sales right now, but should be about that level by 2030, according to boss Pascal Soriot's targets.

Admittedly, smaller firms will probably stay put, since they risk getting lost in the giant American market. That might apply to Pearson and $11 billion Melrose Industries MRON.L, both of which may also struggle to make the grade for the S&P 500. But for larger companies, a deeper pool of investment and a more liquid market may prove increasingly enticing. That suggests the European exodus is far from over.

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(Editing by Liam Proud; Production by Shrabani Chakraborty)

((For previous columns by the author, Reuters customers can click on DONNELLAN/Aimee.Donnellan@thomsonreuters.com))