(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
By Yawen Chen
LONDON, May 8 (Reuters Breakingviews) – Patrick Pouyanné is seriously considering a U.S. primary listing for his $170 billion oil major TotalEnergies. The French company’s chairman and CEO will report back to his board by September. It shouldn’t take that long to decide that the move is a bad idea.
Pouyanné’s main reason for considering the move is that U.S.-based investors, who already account for almost half of Total’s shareholder base, are friendlier towards oil than the Europeans. Chevron and Exxon Mobil tend to command higher valuation multiples than non-U.S. energy giants. The first problem is that Total’s strong existing U.S. investor base suggests there’s nothing stopping fund managers in the country from buying Pouyanné’s stock right now.
True, switching to a primary listing in the United States is a prerequisite for being included in the S&P 500. That would force index-tracking funds to hold Total, potentially boosting the shares. But S&P 500 members must also be domiciled in the United States, according to its methodology documents, and show strong links to the country as assessed by its operations, revenue and assets.
Total does not fit the bill. Pouyanné has insisted that Total’s headquarters remain in Paris, probably because 35% of its roughly 100,000 employees are in France. Last year, less than a tenth of Total’s $237 billion in sales came from North America, whereas France accounted for 23% and the rest of Europe 41%. In the United States, Total’s oil and gas production only accounted for about 3% of total output that year. Out of Total’s 14-member board, half are French, with just one from the United States.
Nor is Total’s share price obviously suffering. Pouyanné’s equivalent at Shell, Wael Sawan, has pointed out that the UK group’s valuation is well below that of Exxon and Chevron, as judged by free cash flow yield. It’s debatable whether that has anything to do with listing location. Even if it does, however, there’s no obvious upside for Total, whose 9% 2025 free cash flow yield is roughly the same as the U.S. giants. That’s according to Breakingviews calculations based on mean analyst estimates gathered by LSEG.
Meanwhile, switching to the U.S. would have downsides. A key part of Pouyanné’s green-energy strategy is Total’s growing electricity unit. Unlike oil, which is priced and traded globally, the power business is inherently local. It’s also of interest to governments. Pouyanné could risk angering the state if he decamped across the Atlantic while simultaneously focusing more on the politically sensitive power business. In other words, switching Total’s listing would be pointless at best and harmful at worst.
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(Editing by Liam Proud and Pranav Kiran)