The two American oil giants trade at over 8x their EBITDA on average, versus only 5x for TotalEnergies. It would be tempting to compute a flattering theoretical share price to make shareholders dream. However, those investors do not need fairy dust, as the real stakes lie elsewhere.
Glencore, AstraZeneca, TotalEnergies... In recent years, several European giants have expressed their desire to establish a dual listing or a cross-listing in the United States. Growing frictions between regulators and large European companies push their leaders to eye Wall Street. Added to that are stronger US index performance, more attractive valuations and higher liquidity.
What changes?
In the United States, it has already been possible to buy Total via ADRs (American Depositary Receipts), the American version of GDRs (Global Depositary Receipts). The operation consists of buying the shares in dollars through a broker which holds the shares in the country of issue. Useful, but far from optimal when it concerns nearly 40% of shareholders.
In our context, this is not a double listing but a cross-listing. There will not be two separate classes of shares but indeed the same one traded across both markets. The price will be continuously adjusted according to the exchange rate.
The goal is to simplify procedures and reduce transaction costs to facilitate access to TotalEnergies shares for American investors.
What does the past tell us?
The historical results of such moves are mixed. Nothing new under the sun; it was shown in 2010 that moving to a more prestigious stock market is beneficial for a stock. Then, an analysis of 130 companies that shifted their primary listing to the US over the last decade shows mixed performance. By end-2024, 70% of them traded below their issue price. So nothing mechanical here.
Let's focus on large companies now. CRH, Flutter, Ferguson and Ferrovial - four European groups worth over $10bn - opted for a US listing over the past ten years. In the 12 months following the operation, their price-earnings ratio fell by about 1% on average, according to the Financial Times.
Amongst the three benefits generally expected from such a change - better liquidity, higher valuation, and coverage by more analysts - only CRH, the biggest of the bunch, saw an improvement on all three fronts in the 18 months that followed. The valuations of Ferrovial and Ferguson fell, while Flutter resisted.
Data shows that the bigger the company before its US listing, the stronger the impact. These four companies saw their liquidity quadruple on average. For the eight companies with market caps of less than $10bn studied by the Financial Times, the increase was 45% on average: meanwhile, CRH multiplied its liquidity by 7.
Should we expect a revaluation?
TotalEnergies has nothing to envy its American peers in terms of fundamentals. However, several barriers limit the hope of full valuation alignment. Regulation-wise, the risk is much lower across the Atlantic. And oil is seen as a declining sector in Europe - this is not the case in the United States.
In 2023, the International Energy Agency (IEA) estimated that the peak oil demand would be reached by 2030. The most recent data push this to 2040-2050. The US did not cede to massive investments in renewables as Europeans did, giving ExxonMobil and Chevron a readability advantage, in addition to the confidence they inspire regarding their ability to generate cash.
They also benefit from being part of an index. TotalEnergies plans to keep its main listing in Paris, preventing it from joining any US index. The exposure of a stock to passive flows is no longer a negligible argument. Three S&P 500 ETFs currently rank among the top 25 most-valued assets in the world.
However, Patrick Pouyanné has never turned his back on fossil fuels. Not that BP and Shell did, but more pronounced strategic reversals have been seen with the two Europeans. As a result, the fundamentals are solid. (See a related article by Kevin Smith on this topic: What's the fair price for TotalEnergies shares? | MarketScreener.) Margins, solvency, and profitability ratios rival those of Exxon Mobil and Chevron.
Total Return performance of TotalEnergies, Chevron and Exxon Mobil over three years
In the long term, shareholders can bet on the management's ability to steer the energy transition without compromising the redistribution policy. That is where Europeans have sometimes lacked clarity, and Americans concentrated on fossil fuels, as the French group could play its own card.
As to whether the famous "European premium" is really set to disappear, only time will tell. But if TotalEnergies' P/E were to move from 10x to 12x or 13x, the theoretical stock price would sit around €69 to €75. This strategic change will probably not work miracles overnight, but it could well spark interest from other French and European companies, attentive to its medium-term effects.
