European companies that have added a US listing often do not see an uplift to their valuations, the Financial Times has found, in a challenge to some executives’ claims that a New York stock market presence is a sure-fire route to higher share prices.
An analysis of 12 European-listed companies that have added US listings since 2016 — including Ferguson, CRH and Flutter Entertainment — found that, in half of cases, valuations fell, while in a number of cases there was no uptick in the number of analysts following the stock. However, two-thirds of the companies did enjoy greater liquidity in their shares after the move.
“The basic thesis that you move to the US and your share price improves is not right,” said Richard Werner, partner at law firm BCLP. “It’s definitely not as straightforward as that.”
European companies and their investors have been enticed by the US stock market’s huge rise in recent years, believing that — despite a recent market sell-off — they will enjoy higher earnings multiples there.
UK broker TP ICAP last week said it was planning to list its data business in New York, while in February London-listed Glencore said it was reviewing whether other venues — including the US — would be “better suited” to trading its shares, in a potentially major blow to London’s historic status as a centre for mining finance.
London-listed construction group Ashtead plans to shift its primary listing to New York and its chief executive has said “the advantages of a US primary listing over other markets . . . have become more evident over the past few years”. British advertising group WPP has “looked at” a switch, while French asset manager Tikehau is also considering such a step.
The FT’s findings come as European policymakers urgently try to revive domestic markets and encourage companies to stay listed at home. In the UK, regulators have overhauled rules for listed companies in an attempt to make London more competitive.
The companies analysed by the FT all added new US quotes — either a primary or an additional listing — while keeping their European listings.
UK-based plumbing equipment supplier Ferguson and gambling group Flutter Entertainment are among groups to have added US listings in recent years, as have smaller companies such as dry bulk operator Himalaya Shipping and pharmaceutical company Indivior.
The FT found Irish building materials group CRH, Indivior and shipping group Okeanis Eco Tankers were the only companies to have enjoyed an uplift on all three measures analysed — valuation, share trading volumes and analysts following — while litigation specialist Burford Capital and Spanish infrastructure group Ferrovial experienced no benefit on any. The others fell short on at least one measure.
Valuations of half the companies analysed were lower in New York than they were on local markets before the move, with smaller stocks hit harder. On average, the forward 12-month price/earnings ratio for smaller companies — those less than $10bn in market capitalisation — was about 7 per cent lower in New York, while for larger companies it was about 1 per cent down.
“For smaller or mid-cap European companies, a secondary listing in the US may not generate interest among US investors who look at larger companies where brand recognition is more global,” said Apostolos Thomadakis, head of research at think-tank the European Capital Markets Institute.
However, CRH enjoyed a sustained valuation boost from its New York listing. Its average p/e ratio rose from 12 times in the 18 months before it switched its primary listing to the US to an average of 15 times in the 18 months since.
But Flutter, which added a US quote in January 2024 and then in May made New York its primary listing, experienced no improvement — its p/e ratio fell from an average of 29.8 times in the UK to 29.1 times.
So too did former FTSE 100 constituent Ferguson and Ferrovial, whose average US valuations were 9 per cent and 11 per cent lower respectively after US moves.
Adding a US listing can be an expensive step — BCLP’s Werner said the cost can range from about £500,000 to more than £1mn, depending on the scale of legal, accountancy and investment banking services used, plus fees charged by stock exchanges. Companies also have additional, ongoing reporting costs to maintain the listing that can run into tens of thousands of dollars a year.
“There’s a lot of direct costs and indirect costs,” said Kim Balle, chief financial officer of Torm, which added a listing on the Nasdaq exchange in 2017.
The FT’s analysis did not take account of factors such as company earnings releases, regulatory changes or shifts in sector valuations, which could all affect a company’s p/e ratio.
Most companies benefited from greater liquidity — the ease with which shares can be traded without necessarily moving the price. Large companies experienced a boost of about four times on average when comparing their Europe-listed shares with their US ones, while small companies witnessed about a near-45 per cent increase.
CRH’s liquidity is now about seven times higher in New York. But Ferrovial’s liquidity has floundered there: about 37,000 of its shares a day are traded in the US, compared with more than 1mn in Europe both in the 10 months before and after the US move.
This was “as expected with the new Nasdaq listing”, Ferrovial told the FT, adding the group’s “intention is to build up additional liquidity in the US over time”.
The FT also found that, on average, there was little or no uptick in analyst coverage for a number of the companies analysed, even though bosses often cite greater visibility as a reason for a New York presence.
Oliver Lazenby, partner at law firm Freshfields, said: “All these things are finite, analysts at banks and institutional investors don’t necessarily have the resources [to cover every single company].”
The sheer size of US markets means investors and analysts tend to take more notice of larger companies such as Flutter or CRH, he added.
“In a bigger sea, the attention tends to go to the bigger fish,” said Paul Amiss, partner at Winston and Strawn. “If you’re a tenth of that size, then clearly you’re going to have to work harder to make waves.”
Methodology
The New York Stock Exchange and Nasdaq provided the FT with lists of European-listed companies that had added US listings since 2016. Large companies are defined as those with a market capitalisation of more than $10bn. The FT’s analysis took a company’s share turnover ratio — measured as the ratio of a stock’s four-week trading volume to the average number of its shares outstanding expressed as a percentage — as the measure of liquidity. SPACs and ADRs were omitted.
To keep timescales equal between a US quote and a European one, the FT used the number of weeks from the US listing date to the present, and applied that same number of weeks to the period before the US move. In cases where there was a longer run of US trading data, we used the complete series in both. While every effort was made to create an exhaustive data set, there was no straightforward way to pull together a comprehensive list of companies and some may be missing as a result. We initially found 15 companies that had added a US listing since 2016, but three — Flex LNG, Nyxoah and Alvotech — did not have continuous figures for their forward 12-month price-earnings multiples because of negative earnings forecasts so were omitted from the analysis. Four data points in Torm, where the p/e ratio briefly exceeded 50, were also excluded for visual purposes. The relatively small sample size in this case is unavoidable, which may skew results. Data as at February 28.
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