The recent article “US listings often fail to boost valuations of European groups” (Report, March 18) brought to mind the famous Saturday Night Live skit where the commentator confused “violence” on television with “violins” on television — and then wondered what all the fuss was about!
While the piece cited analysis that it said would challenge the claims of some executives that a New York stock market presence is a sure-fire route to higher share prices, the findings actually did no such thing.
The basic error was deciding to look at 12 European listed companies that have “added” US listings whereas the phenomenon observed in the markets is the improvement in liquidity and valuation of UK companies that have “changed” their primary listing from London to New York.
I have never heard a credible claim that simply adding a New York listing would in itself do anything other than increase liquidity. And while the FT piece mentions both adding a US listing and changing the primary listing, there is such a fundamental difference between these in terms of trading dynamics, including the possibility of index inclusion and the expanded investor universe that follows a US primary listing, that the outcomes are plainly not comparable.
For the larger London-listed companies that have moved their primary listings over the past five years — CRH, Ferguson, Flutter, Smurfit Kappa being examples — the resultant higher liquidity and valuations are clear.
Even so, improved valuation and liquidity are often not the main drivers for companies who do move — or who are considering moving — their primary listing to the US. In particular, access to deeper pools of primary capital and the ability to issue equity for strategic purposes are more important, especially given the collapse over the past 10 years of UK primary equity issuance. For many UK primary-listed companies, particularly large global companies, the question they face, sadly, is what are the benefits of staying.
Michael Tory
Co-founder, Ondra Partners, London EC2, UK
