Unsatisfied with the valuation, Shell, the largest component stock of the UK benchmark stock index, is considering "withdrawing"

Shell CEO Wael Sawan has recently stated that the company is exploring all options, including delisting from the London market and instead listing in the United States. Shell's move is based on the significant valuation gap in different markets.

Sawan said, "If we do everything we can, do what we are currently doing, and still cannot eliminate the valuation gap, we have to consider all options." Sawan made it clear that if by mid-2025 Shell still faces a valuation gap in both markets, there will be no taboos at that time.

A Shell spokesperson stated that Sawan has expressed similar attitudes on several public occasions.

Currently, Shell is the largest component stock in the UK benchmark FTSE 100 index. From most perspectives, Shell is the largest company listed in London. Analysts say that if Shell really leaves the UK market, it may trigger a series of chain reactions, with the risks faced by London far exceeding the awareness of market and London Stock Exchange officials.

• The fifth largest component stock in the UK benchmark FTSE 100 index, BP, will also face huge pressure to seek a higher valuation following Shell.
• Glencore Plc, a commodity trading company with a large coal business, which is also among the top ten in the UK benchmark FTSE 100 index, will face similar pressures.
• Shell and BP are not only among the largest listed companies in London, but also significant dividend payers, strongly supported by dividend-seeking investors, who are important participants in the UK stock market.

The two largest oil and gas companies in Europe, BP and Shell, have been unable to resolve their valuation issues for decades. The trading prices of these two companies are about one-third lower than their American counterparts such as ExxonMobil and Chevron, indicating a significant undervaluation.

Taking the free cash flow yield as an example, Shell exceeds 12%, BP nearly reaches 16%, while ExxonMobil is below 7% and Chevron is only 6.5%.

Currently, delisting from the UK and moving to the US is not Shell's preferred solution. The company is taking a series of measures to try to close the valuation gap, including cost-cutting, divesting underperforming divisions, and investing in free cash flow to repurchase shares. Sawan pointed out that Shell will continue to repurchase shares and repurchase them at a discount, which is an excellent investment opportunity.

Since Brexit, the City of London has been concerned about its declining global financial status. However, analysts point out that Shell's consideration of listing in the US is not due to Brexit, but rather stems from European investors' indifference towards fossil fuels, unless there is outright hostility. Therefore, as there are fewer buyers of European oil stocks compared to the US, the valuation gap for oil stocks between the UK and US markets may persist.

Once natural resource giants like Shell considered London their natural home; however, today the situation has changed dramatically, with the United States, as the world's largest oil producer, beckoning However, analysts believe that choosing to list in the United States may not necessarily boost Shell's valuation to its expected level. Considering that it also has American Depositary Receipts, allowing U.S. investors to indirectly purchase its stock. Another reason for the valuation gap with its U.S. peers is that Shell, in addition to its traditional oil business, is also involved in the green energy sector. However, for shareholders concerned about climate change, it is still seen as a fossil fuel company. Both camps are not pleased.

Furthermore, transferring the primary listing venue to New York also faces many challenges. Shell needs the consent of shareholders holding over 75% of its shares - a high threshold. Additionally, it will have to wait before gaining eligibility for the S&P 500 index, which could initially depress its valuation and incur additional regulatory and accounting costs