Success for the City as mining corporation abandons transition plans for New York move
In a move that bucked the trend, Glencore, one of the biggest stocks on London's blue-chip index with a market capitalisation of around £35.9 billion, announced it would not shift its main listing to New York. The FTSE 100-listed miner made this decision despite the allure of the US markets, which have been attracting an increasing number of companies due to strategic advantages.
Glencore's primary listing is currently in London, but it is also listed on the Johannesburg Stock Exchange. The company's decision not to move its main listing away from London came as it reported a 14% fall in underlying earnings to £4.09 billion, and net losses nearly trebled to £493 million, amid lower coal prices, copper production issues, and uncertainty triggered by Donald Trump's stop-start tariffs, including on US mineral imports.
The miner warned over job cuts as part of efforts to cut costs by more than £753 million by the end of next year. Savings will come from cutting the workforce as Glencore streamlines its operations across energy, consumables, contractors, maintenance, and administrative functions. More than half of the cost savings are expected to be secured by the end of 2025.
The US Advantage and Glencore's Decision
The scale and depth of US capital markets is 'unrivaled', but Glencore does not believe becoming a US domestic issuer would be value accretive for shareholders at this point in time. The company's shares have slumped over a quarter in the past year, with a 3.8% decrease on Wednesday, specifically 11.45p to 289.60p.
US markets often place higher valuations on companies, particularly in sectors that the US market values more generously. This leads to higher valuations for companies seeking funds, which can be attractive for investors and enhance a company's perceived value. However, Glencore seems to have weighed these advantages against the potential drawbacks and decided to stay put.
The decision not to move its main listing to New York was also influenced by factors such as investor alignment, regulatory considerations, index inclusion and analyst coverage, liquidity and market dynamics, and private equity and takeovers.
The Shift Away from London
Other companies have not been as cautious. Paddy Power owner Flutter, Tui, and Just Eat have all shifted their main listings away from the London Stock Exchange. In December, Ashtead Group announced its plan to move its primary listing to New York from London. Even Astrazeneca, a British-Swedish multinational pharmaceutical and biopharmaceutical company, has fuelled speculation that it could switch its main stock market listing from London to New York, and even move its headquarters to the US.
Astrazeneca's CEO, Pascal Soriot, stated that the company is 'very American' and refused to rule out moving its main stock market listing to the US. These moves reflect a broader trend of companies seeking to tap into the strategic advantages offered by the US markets.
Despite this trend, London remains a significant financial hub with advantages like sector expertise, regulatory familiarity, and global perspective, which continues to attract certain industries, such as mining companies. Glencore's decision to stay in London demonstrates that while the US markets may offer attractive advantages, they are not a one-size-fits-all solution for every company.
- Glencore, despite the allure of the US markets with their strategic advantages and higher valuations, decided against shifting its main listing to New York, as they do not believe becoming a US domestic issuer would be value accretive for shareholders at this point in time.
- The company's shares have slumped over a quarter in the past year, and Glencore seems to have weighed these potential advantages against the potential drawbacks, such as investor alignment, regulatory considerations, index inclusion and analyst coverage, liquidity and market dynamics, and private equity and takeovers, before making its decision.
- While the US markets may offer attractive advantages, they are not a one-size-fits-all solution for every company. London, with its sector expertise, regulatory familiarity, and global perspective, continues to attract certain industries, such as mining companies, demonstrating the importance of considering various factors before making a decision regarding listings.
