ADRs are tradable certificates issued by U.S. banks representing a specific number of shares (usually one) of a foreign company. They tend to be less liquid than fully listed stocks — and that deters some investors.
The move was welcomed by investors, with shares up 0.8% on Monday. It should bring in new U.S. investors, especially if — although this is not a given — AZ eventually gains membership of the S&P 500.
Defections from the UK
At first blush, it confirms fears first aired when, in July, The Times reported that CEO Pascal Soriot wanted to move AZ’s stock market listing to the U.S.
The British newspaper said Soriot, who today marks 13 years at the helm, had spoken privately of doing this on several occasions and had even discussed moving AZ’s domicile. Soriot fanned the flames when, at subsequent results briefings, he did not deny the report and even called AZ a “very American company.” AZ is among several big pharma companies to recently pause or postpone U.K. investments amid frustration at the country’s drug-pricing regime.
Accordingly, some interpret this as another blow to the London Stock Exchange (LSE), which is indeed how it was reported locally. A clutch of big names, all former FTSE 100 members, have moved their primary listing away from the U.K. lately.
The defections began when, in 2021, BHP Group (previously BHP Billiton) — at the time the FTSE’s most valuable company — announced plans to switch from a dual-listed structure, in which its shares were listed in both the U.K. and Australia, to a single primary listing on the Australian Securities Exchange (ASX). This was essentially a cost-saving and simplification exercise and few alarm bells rang at the time, not least because BHP retained a standard listing on the LSE, allowing British investors to remain exposed to the business. Moreover, BHP had no real assets in the U.K., other than a head office.
The following year, the plumbing and heating products distributor Ferguson — a U.K. stock market stalwart for decades under its former name of Wolseley — moved its primary listing to New York. Again, this was no surprise, since North America by then accounted for more than 90% of its sales.
There was still no panic when, in March 2023, CRH — the world’s biggest building materials supplier — chose to switch to New York. After all, having only had a primary listing in London for 12 years, CRH was essentially an Irish company generating more than three-quarters of its earnings in the U.S.
There was more disquiet when Flutter Entertainment, owner of successful betting and gaming businesses such as Paddy Power, Betfair, Sky Betting & Gaming and the U.S. business FanDuel, said it was considering moving its main listing to New York. It has since done so.
This was altogether more serious as Flutter, the Irish-founded Paddy Power aside, was essentially British and a big player in its domestic market. Compounding concerns, later that year, the Cambridge-based chip designer Arm Holdings opted to list on Nasdaq instead of the LSE on its return to the stock market.
Since then, the Anglo-German tour operator TUI has moved from a dual listing in London and Frankfurt to a single one in the latter, while the FTSE 100 plant and equipment hire company Ashtead — named after the Surrey village where it was founded — has announced plans to move its primary listing from London to New York. This again reflects the fact that 90% of its business is now in North America.
The bad news, like the London drizzle, has kept on coming: Just Eat Takeaway said last December it would move from a dual listing in London and Amsterdam to a single one in the latter; the same location was chosen in February this year by Unilever for its demerged ice cream business.
Fast-fashion giant Shein was recently reported to have chosen Hong Kong over London for its forthcoming Initial Public Offering, and Wise (formerly Transferwise), a fintech founded in London by two Estonian entrepreneurs and now valued at more than £11 billion ($14.78 billion), received shareholder approval in July to move its primary listing from London to New York.
AZ a different case?
AZ’s decision, though, may not be as bad as it looks. It was at pains to stress its “current status as a U.K. listed, headquartered and tax resident company” would not change and that this was all about attracting a broader mix of global investors and better access to New York’s larger pools of capital.
Nor does this look to be a move in search of a higher stock rating: AZ’s price-to-earnings ratio exceeds not only those of European peers like Novo Nordisk and Roche, but also several U.S. peers including Pfizer, Bristol-Myers Squibb and Merck.
The British government should not get complacent, however. This move potentially eases a full switch of listing to New York should Soriot’s frustrations at the U.K. finally boil over.
Rachel Reeves, the country’s chancellor, could prove she is alert to the risk posed to the London market by removing Stamp Duty Reserve Tax, the anachronistic levy of 0.5% applied on all share purchases.
But — as it raises £3 billion annually for the Treasury — I wouldn’t bet on this.
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