eToro: Shell's decision reflects need to cut complexity around industry giants

eToro: Shell's decision reflects need to cut complexity around industry giants

Commodities
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Ben Laidler, Global Markets Strategist at multi-asset investing platform eToro, comments on Royal Dutch Shell’s decision to abandon its dual listing structure and to move its headquarter to the UK.

Shell's move to unify its share class in the UK will increase the attraction of its high dividend yield, give it the flexibility to buy back more shares, and help reduce both cost and complexity.

The need to cut complexity is felt around the world: Industry giants that dominated the 20th century stock markets such as Toshiba and General Electric both announced spin offs following pressure from investors. At Shell, Third Point has been knocking on the door with a similar proposal.

Activist investor Dan Loeb wants Shell to create a standalone spin-off company comprising Shell’s Liquefied Natural Gas, Renewables, and Marketing businesses.

Though the decision by Shell to terminate its Dutch listing was probably not a direct response to Third Point’s pressure, it might have spurred the decision as it added to other looming desires of the company’s shareholders.

Shareholders have been calling for a return of cash through share buybacks and higher dividends, which might have been more pressuring than the ‘complexity of regulation’ now cited as one of the main reasons. Following Unilever and BHP, Shell is not the first to take the decision against a dual listing, and unlikely to be the last. The focus will now be on other dual listed companies.