Farewell Europe! – Why More and More European Companies Prefer to Go Public in the USA

Patrick Pouyanné, CEO of the French energy company TotalEnergies, is openly considering relocating the primary listing from Paris to New York. This would mean that Total's shares would be traded in New York in the future. In recent times, there have been several prominent examples of European companies turning their backs on their home stock exchange and making the leap across the Atlantic. What does this trend mean for European stock exchanges and investors?

This plan by Total CEO Pouyanné has caught the attention of the French government, which had intensified its efforts after Brexit to make Paris the new attractive financial marketplace in Europe. However, Pouyanné eventually scaled back his pursuit of a primary listing in the USA and spoke of a "Paris-New York cross-listing." The shares would then be traded almost equally in Paris and the USA. In the case of TotalEnergies, the final decision has yet to be made. The French company currently has a market capitalization of around 155 billion euros, making it one of the top 15 listed companies in Europe. The move to New York would be a severe blow to the European financial market.

Decline of the European Financial Market?

The purpose of moving to US exchanges is, on the one hand, to be closer to major investors - and perhaps to business as well - and on the other hand, to hope for higher share prices. On the homepage of the Irish building materials manufacturer CRH Plc, it reads: "[...] the leading provider of building materials solutions, is pleased to announce the successful transition of its primary listing to the New York Stock Exchange (NYSE) [...]". The company generated around 60% of its revenue in the USA in 2023 and approximately 75% of the group's EBITDA (earnings before interest, taxes, and depreciation) in North America. Another example is the traditional German company Linde AG. Founded by Carl von Linde, the company is one of the most successful industrial companies in the field of industrial gases. Linde AG was also a founding member of the German stock index (DAX) in July 1988. However, after the merger with the American company Praxair, the historical roots were also severed. The company's stock was listed on both the Frankfurt Stock Exchange and the New York Stock Exchange and was part of the DAX, the Euro Stoxx 50, the MSCI USA, and the S&P 500 Index. At an extraordinary shareholders' meeting in January 2023, the majority of shareholders voted to discontinue the listing on the Frankfurt Stock Exchange as of March 1, 2023. Since then, Linde Plc's primary listing has been on the NYSE. Young European companies that need fresh capital for their planned growth are also increasingly considering a listing in New York. Spotify, a Swedish audio streaming and media service provider founded in 2006, with currently more than 600 million active listeners, brought new shareholders on board in April 2018 through a "direct public offering" on the New York Stock Exchange (NYSE).

Consequences for Investors

This trend also has practical consequences for investors and fund managers. The Irish building materials manufacturer CRH, currently still a member of the MSCI Europe Index, will leave this index for the MSCI USA at the end of May. A significant departure, as the company has a market capitalization of more than 43 billion euros. Passive funds/ETFs that track the MSCI Europe will have to sell the stock on the index rebalancing day, and those that replicate the MSCI USA will have to buy it. Meaningful diversification with only one global equity fund or even an ETF will thus become even more difficult. More significant, however, is the impact on the European economic area, which continues to lose attractiveness, and whose stock market continues to trade at significant discounts compared to the USA.

This information provides a market overview. It does not constitute a direct or indirect recommendation to buy or sell securities or an investment strategy. When investing in securities, price fluctuations due to market changes are always possible. Despite careful research and collection, no liability or guarantee can be assumed for the accuracy of the data.