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In recent years, a growing number of UK shares have left the London Stock Exchange (LSE), choosing rather to migrate their primary listing overseas.
Flutter Entertainment and CRH recently made the leap to the US and FTSE 100 stalwarts Shell and Ashtead are considering it. Better valuations, a broader investor base, and a more favourable regulatory environment are often cited as key motivators.
This trend seems to suggest a shift in the way global markets operate, raising concerns about the UK’s future competitiveness.
While a move promises better growth potential for these companies, it may complicate access for UK-based investors. When choosing stocks to buy, investors should consider the impact this may have on their portfolio.
I’ve identified three more UK companies with a motive to consider leaving.
AstraZeneca
There are a few good reasons why the FTSE 100’s largest company by market cap might consider a move to the US. Early this year, the government’s budget plans included a potential cut to funding for a vaccine factory in Merseyside.
In addition, some of its new medical developments have been rejected by the NHS for not displaying sufficient value. The US promises higher valuations for biotech firms, greater access to capital, and a less rigorous regulatory environment.
HSBC
THE UK’s largest bank was once headquartered in Hong Kong and still derives half its global revenue from Asia. Its British business is tiny by comparison and it’s already downgraded its head office from Canary Wharf to the City.
With the UK’s financial landscape shrinking, it could consider a move back to Hong Kong or Shanghai. Additionally, the US offers a better banking environment with higher valuations for financial institutions and looser regulatory frameworks than the UK.
British American Tobacco
British American Tobacco (LSE: BATS) might consider relocating its primary listing to the US as it generates 44% of its revenue in the country. It’s already been pressured by GQG Partners to move to New York, where key rival Philip Morris trades at a higher valuation.
Recently, it’s been battling to raise capital to fund its transition towards reduced-risk products such as vaping and heated tobacco. It may find the US more favourable for innovation in nicotine products compared to the UK and its increasingly restrictive policies.
An attractive option?
BAT CEO Tadeu Marroco has described the idea of a US move as a “distraction“, so it’s unlikely to happen soon. That’s good news for UK investors, as it’s a reliable dividend payer with a high yield of 8.2%.
But weak performance and high expenses have put the company in a tough position. It’s racked up a lot of debt and posted a £13.9bn loss in its latest figures. If the costly shift to vapes and similar next-gen products doesn’t pay off, it could end up in financial trouble.
Still, analysts seem positive about a recovery. Earnings are forecast to grow 44% in the next 12 months, bringing it back to profitability. With a forward price-to-earnings (P/E) ratio of nine, that would give it an attractive valuation.
My own investment in British American Tobacco has served me well so far. If it delivers strong full-year results on 13 February next year, I will buy more of the shares.
