Shell Share Discussion Threads

[waldron] 16/11/2021 16:25

Shell Changes: What Should Investors Do?

Royal Dutch Shell is proposing to turn its back on the Netherlands and create a single share class in London, but what does that mean for investors?

James Gard

16 November, 2021 | 3:32PM


UK investors wanting to trade shares in Royal Dutch Shell have for years been faced with the dilemma of which one to choose. Unusually, the company trades on the FTSE 100 with two tickers, and is the only stock to do so.

But many would struggle to explain the difference. Now, under plans put forward by the oil major, these two share classes could become one as the company ditches the “Royal Dutch” and moves its headquarters to London. The move comes just weeks after activist investor Third Point revealed plans to split Shell up, though it hadn't specifically proposed this latest course of action.

The current set-up is quite complex and the aim is to simplify this.

At the moment, Shell trades under tickers “RDSA” and “RDSB”, with the “A” shares subject to a 15% tax on dividends imposed by the Netherlands; “B” shares don’t, and are the ones usually favoured by UK investors, and trade at a (modest) premium to the A shares.(The A shares, on November 16, were at £17.05 and the B shares stood at £17.09.)

“A” shares pay out in euros and “B” shares in pounds sterling, although the figure quoted is $0.24 for the latest quarter. By having a single pool of ordinary shares, Shell hopes to speed up its plans to buy back shares, which is one of the planks of its post-pandemic appeal to shareholders.

This matters a lot for income investors because Royal Dutch Shell pays out billions to shareholders like DIY investors, funds and pensions. In 2020, Shell cut its dividend for the first time since World War II, but has been trying to play catch-up since with raised dividends and share buybacks. Buybacks reduce the number of shares in issue, with the aim of boosting the share price, and are currently in fashion among large FTSE income payers like WPP and Unilever. We wrote about the trend in our recent top FTSE dividend round-up and we plan to cover the topic in more detail this week.

Climate Pressure

More dramatic changes than a tidying up of the share structure are afoot.

As the name suggests, Royal Dutch Shell has roots in the Netherlands and UK. Its headquarters is currently in The Hague but the shares are listed in Amsterdam and London. Under the plans, Shell will have its HQ in London, while its chief executive and chief financial officer will move here too from the Netherlands. Crucially, Shell will move its tax residence to the UK, where ministers have received the news as a “vote of confidence” in British business.

Unilever, another company with Anglo-Dutch roots, threatened to go in the opposite direction and shift its base to the Netherlands – but reversed this after a backlash from big UK shareholders. The Dutch government is understandably not delighted by the news, describing it as an "unwelcome surprise".

Cynics might say Shell’s decision is not unrelated to the legal pressure the company is under in the Netherlands, where a court ruled its emissions cutting targets are not strict enough.


As Morningstar oil analyst Allen Good explains, though, this move is “unlikely do anything to shield the company from recent lawsuits over emissions”--such is the global nature of the oil business and international treaties on carbon emissions. Companies of Shell’s size can’t use regulatory arbitrage even if the option was there.

What should investors in Shell do?


Naturally, they will be asked to vote on the proposal, which requires at least 75% of shareholders to support it to go ahead.


Morningstar’s Good says the proposals won’t have an impact on the company’s valuation. It retains its no-moat rating – downgraded from narrow – and has a 3-star rating.

Shares have risen 35% this year as oil prices have soared, but Morningstar still values them at £19.40, above the £17 level they are trading at now.

Shell claims a simpler structure will help make its climate transition progress smoother, but Good says the move is unlikely to have any meaningful impact.

[grupo guitarlumber] 16/11/2021 13:58

nasty corrupt and treacherous nations.


SOME MORE SO

and UK A VICTIM SO INNOCENT

[xxxxxy] 16/11/2021 11:52

European and British wholesale gas prices have surged today after Germany suspended the certification process for Russia's controversial Nord Stream 2 pipeline.The move has triggered fresh concerns about supplies coming to the Continent at a time when shortages have already sent prices soaring.Russia, a major supplier of gas, has been accused of holding back supplies to put pressure on its European neighbours to approve the new Nord Stream link.The pipeline would bypass current ones running through Ukraine and go straight to Germany - raising concerns that Ukraine could be cut off in future disputes.... Daily Telegraph

[xxxxxy] 16/11/2021 11:37

John Redwood@johnredwoodWhy does the media ignore Germany's continuing dependence on lignite for electricity and the expansion of strip mining? Will a new German government close down more coal or stick with a 2038 timeline?

[31337 c0d3r] 16/11/2021 10:41

Christmas Eve in Russia is 6th January.

It would make more sense on December 25th.

Anyway it won't happen. Putin is currently on best behaviour trying to trick Germany. A Europe dependant on Nordstream 2 is the bigger prize. Ukraine can be done at any time after, and having Nordstream will only add insurance.

[xxxxxy] 16/11/2021 08:37

Christmas Eve.Russian time.

[xxxxxy] 16/11/2021 08:35

European nations must choose between "mainlining" Russian gas and defending peace in Ukraine, Boris Johnson said on Monday amid escalating tensions with the Kremlin.The Prime Minister's message, contained in his pre-written Mansion House speech, appeared especially aimed at Germany, which has championed the Nord Stream 2 pipeline.Angela Merkel, the German Chancellor, has pushed ahead with the gas pipeline between Russia and Europe, despite US and UK opposition, but will soon be leaving office.The intervention came as Russian troops continued to gather near Ukraine, prompting fears of an imminent invasion, and tensions over migration escalated at the Polish-Belarus border.A flurry of calls between European leaders about the stand-offs took place on Monday, with Ukraine claiming that nearly 100,000 Russian troops have gathered at its border... Daily Telegraph

[loganair] 15/11/2021 15:26

Russ Mould, investment director at AJ Bell:

“The London market was bolstered by the news Royal Dutch Shell is casting off its dual-share structure but unlike BHP and Unilever is not threatening divorce and has instead committed itself to the UK and remaining in the FTSE 100 index.

“The better comparison is with Unilever – which like Shell has Dutch and British roots. The consumer goods giant ended up being brought back from the brink of a move to the Netherlands in the face of angry protests from shareholders.

“It turns out Shell didn’t need to have its feet held to the fire, and it will remain a key constituent of the FTSE as it tidies up its complex A + B share structure.



Laura Hoy, equity analyst at Hargreaves Lansdown:

"Ultimately, the new structure would be a net positive for shareholders as it will streamline the company and make it easier to manoeuvre moving forward.

"Aside from the fact that the shares they hold will no longer come with a ‘Royal’ designation, this new alignment won’t change much for investors.

"The long-term growth story for Shell still rests heavily on the oil price. For now, buoyant oil prices are keeping the group’s cash coffers topped up, which has had a positive impact on debt and given the group the means to boost shareholder returns.

"However, with the inevitable shift to more sustainable energy picking up steam we suspect the need to invest in greener operations will keep a lid on what the group can pass on to shareholders.”

[loganair] 15/11/2021 15:23

Dutch government only has itself to blame for Shell move to UK:

Sky's Ian King explains why shareholders are welcoming Shell's decision to follow Unilever and RELX in moving away from Dutch controls, confirming the end of "royal" and "Dutch" in its name.


They're only two little words - but they are symbolic of a huge shift at one of the world's most important companies.

If its management gets its way, following a shareholder vote, Royal Dutch Shell will become plain Shell.

Business Secretary Kwasi Kwarteng is delighted and has called it "a clear vote of confidence in the British economy".

The Dutch government, unsurprisingly, is less impressed. It has described the move as "an unwelcome surprise".

While the Dutch government has declared itself unhappy with the move, it has only itself to blame.

Part of the impetus for Unilever's move - and, it is thought, that of Shell - is the 15% withholding tax levied by the Dutch government on dividends paid by Dutch-domiciled companies.

Under the current arrangement, holders of Shell's 'A' shares pay the tax, but payments for the 'B' shares are routed through Jersey, avoiding the tax. In March this year, Mark Rutte's government announced plans to levy the tax on dividend payments to low-tax jurisdictions, which would snare the dividend payments to the 'B' shares.

This may well have concentrated Shell's mind.

So, too, may a court ruling in The Hague in May this year in which Shell was ordered to reduce its carbon emissions more rapidly than it had itself been planning.

The Netherlands has also made Shell feel unwelcome recently when last month ABP, the biggest Dutch state pension fund, announced it would be dropping Shell, as a fossil fuel producer, from its portfolio.

So there are very good reasons for Shell to take this action.

Giacomo Romeo, analyst at investment bank Jefferies, told clients on Monday: "Simplification of the corporate and shares structure will increase the efficiency of certain financial operations such as equity raises, demergers and buybacks. The latter is a particularly important point because, until now, Shell has been buying back only 'B' shares."

[sogoesit] 15/11/2021 14:15

No worries, Skinny... every bit helps ;-)

[waldron] 15/11/2021 13:57

Cheers Skinny

[skinny] 15/11/2021 13:50

Sogoesit - apologies - missed your post!

[gibbs1] 15/11/2021 12:04

most people in europe and uk prefer their home currencies, not the USD

I currently prefer the swiss franc and Euro

each to his own

share risk and currency can be risky business so i guess it boils down to ones propensity to risk

i for one do not invest in USD denominated shares although as you say many do

[porsche1945] 15/11/2021 11:56

@gibbs

My thinking is not getting hung up on dividends anymore, dividend investing has become a graveyard ( look at cxxp like GSK and Aviva and HSBC shares that have basically halved in value over ten plus years )and these shares have been in real trouble, the best route for us as investors is capital gain and capital returns through splitting/asset sales. My thinking on USD is actually the fact that people prefer to be invested in stocks denominated in USD. I’d rather the shares had a value equivalent of 26 quid than worrying about a few percentage points on dividend. But anything they do going forward has to be better than what they have been doing in the past because the return has been pretty dismal, too much debt all the time. I think they desperately need a change of CEO.