TotalEnergies Eyes NY Listing Amid ESG Policy Shifts

Key Takeaway

• TotalEnergies SE considers a New York listing, attracted by the US market's favorable view of oil and gas amid Europe's strict ESG policies.
• European companies like Shell Plc and Glencore Plc may follow, driven by valuation gaps due to differing ESG standards between the US and Europe.
• The upcoming US presidential election could temporarily impact IPO activity, despite a recovery in IPO volumes on US exchanges this year.

European Firms Eye US Listings

TotalEnergies SE, a French energy giant, is contemplating a move to list its stock in New York, driven by the appeal of the US market's enthusiasm for oil and gas companies and the heavy weight of ESG policies in Europe. CEO Patrick Pouyanne highlighted the loss of European shareholders and the gain of US investors as a significant factor. This sentiment is echoed across other European companies, with speculation about Shell Plc and Glencore Plc considering similar moves. The valuation gap between Wall Street and Europe, particularly for the oil and gas industry, is a tempting factor for these companies. Eric Meyer of RBC Capital Markets pointed out Europe's "virtuous attitude" towards ESG norms and its potential naivety in economic competitiveness.

ESG and Valuation Discrepancies

The divergence in ESG policies between Europe and the US is stark, with a third of European mutual funds excluding fossil fuels, a stance not widely shared by their US counterparts. This discrepancy is reflected in the valuation of companies like TotalEnergies, which trades at a lower earnings multiple compared to US-based Exxon Mobil Corp. The consideration of ESG factors is just one aspect influencing European companies to weigh their listing options, with the broader valuation gap playing a significant role in these deliberations.

Election Impact on US IPO Market

The US presidential election in November is expected to temporarily influence the IPO market, with a potential pause in activity around the election date. Despite this, the IPO market has shown signs of recovery, with companies raising over $13.7 billion on US exchanges this year, surpassing the total raised in the same period in 2023. Advisers and investors anticipate a strategic adjustment in timing for IPOs due to the election, with a historical trend showing a drop-off in IPO activity in November of presidential election years. This year's IPO volume remains significantly below the record year of 2021, indicating a cautious market environment.

Street Views

• Eric Meyer, RBC Capital Markets (Neutral on European oil and gas companies):

  "Europe’s virtuous attitude when it comes to ESG norms, free trade or say on pay may have been naive at times in front of trading partners that put economic interests above all."

• Patrick Jones, JPMorgan Chase & Co. (Neutral on Glencore's strategy):

  "If the scenario of keeping coal were to materialize, it could have major implications for Glencore’s strategy, capital structure and capital availability at a pivotal time for London-listed mining companies."

Management Quotes

• Patrick Pouyanne, CEO of TotalEnergies SE:

  "We are losing European shareholders," while US investors are buying the stock... The company will “seriously” study such a step and present its findings to the board in September."