A reality check on international listings

This report identifies 130 European companies that have ‘moved’ to the US stock market over the past decade and analyses why they moved, what they have in common, and what happened next.  While Europe cannot afford to be complacent, talk of an ‘exodus’ is overblown and the grass is not always greener in the US.  There are bigger problems closer to home - and there is an urgent need for reform to make European equity markets more attractive and more dynamic for investors and issuers alike.

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Over the past few years one of the prevailing narratives in the debate on European capital markets is that there is some form of ‘exodus’ underway from European stock markets to the US (particularly for tech firms and large global companies). This suggests that the US market is paved with gold when it comes to valuations, returns, and liquidity; that it is exerting an irresistible gravitational pull; and that European markets are locked in a downward spiral.

This report, in partnership with HSBC Global Research, analyses the trend of European companies ‘moving’ their primary listing in one form or another to the US over the past decade (2015 to 2024) and challenges this narrative. In what we think is the most comprehensive analysis yet, we found that this trend is more pronounced than we expected - yet less concerning than we thought. On the one hand, we identified 130 companies from Europe (which we define as the UK, EU, Switzerland, Norway, and Iceland) that have ‘moved’ their primary listing to the US over the past decade in some form. These companies were worth a combined $676bn at the time of their move. Whichever way you look at it, that’s a big number. There is, of course, nothing wrong with a company choosing to list in the US - so long as it is an active choice and not the only available option. While successful companies should be applauded wherever they list, every departure risks undermining the dynamism of the European market, lowering valuations, and raising the cost of capital.

But on the other hand, talk of an ‘exodus’ from Europe or the ‘vortex effect’ of the US market is overplayed. These companies represent just 2% of the number of listed companies in Europe and 4% of their combined value. In most cases each company that has moved to the US has done so for sensible business specific reasons. The experience of most companies that have chosen to IPO or list in the US has not been an entirely happy one: 70% of them are trading below their listing price with an overall average performance since listing of -9%. Only a handful of companies have made it into the US blue chip indices. And a far bigger threat for European equity markets is not companies moving to the US but companies moving from public to private markets.

Taken together, these threats underline the need from a policy and structural perspective to make European markets more dynamic and more attractive to investors and companies alike. Pushing ahead with the reform agenda in the UK and renewed efforts on capital markets reform in the EU cannot come soon enough. There is some evidence that the trend of European companies moving to the US may already be blowing itself out - not least, the political context in the US has changed dramatically under the new Trump administration, which has been accompanied by a stark reversal in the relative performance of US and European markets. While Europe shouldn’t panic, it cannot afford to be complacent.

Here is a 10-point summary of the report:

• A significant shift: we identified 130 European companies that ‘moved’ to the US stock market in the past decade in one of four ways: doing an IPO in the US market, doing a direct listing in the US, listing in the US by merging with a US-listed SPAC, or switching their primary listing from a European stock market to the US. These companies were worth $676bn at the time of their move in today’s money (including 51 UK companies worth $272bn) and the 103 that still have a primary listing in the US are worth around $900bn.

  
  

• A sense of perspective: while this is a significant shift, the companies that have moved represent just 2% of the number of listed companies in Europe and 4% of their combined value. Nearly 90% of all IPOs by European companies in the past decade have listed on their domestic market. It may make sense for a small number of companies to move to the US but the vast majority should and do stay at home.

  
  

• A sector perspective: the main concern is that Europe is losing some of its most dynamic companies to the US (like Arm, BioNTech, or Spotify) or some of its biggest homegrown firms (like Linde, or CRH). But only 15% of European technology IPOs by value have listed in the US, and the 13 companies worth more than $10bn that have moved to the US is less than 5% of the number of all $10bn-plus European companies.

  
  

• The elephant in the room: the much bigger threat is not the US market but private markets. Over the past decade more than 1,000 listed companies in Europe with a combined value of just over $1 trillion have delisted after being acquired by privately-held companies or private equity firms.

  
  

• Hit and miss: moving to the US has not been an entirely happy experience for most European companies. 70% of companies that have moved to the US are trading below their listing price, less than a fifth have beaten the S&P 500, and three quarters have not beaten the European market since they moved.

  
  

• A mixed track record: the average share price performance of European companies since they moved to the US (or up to when they delisted or went bust) was -9%, below the average performance of the European market of 8% over the same period. On a weighted basis, the average performance is 29%, but this is distorted by a few big outliers like Arm (+142%) and Spotify (+239%).

  
  

• Why companies move: in most cases each company that has moved to the US has done so for sensible business specific reasons. This is mainly because they already generate a significant amount of their revenues in the US, their peer group is based in the US (particularly the case for large tech and biotech firms), or they are too big for their domestic market.

  
  

• Challenging the narrative: two of the most common narratives for moving to the US are misleading. The valuation discount of the European markets to the US has widened to over 30%, but most of that gap disappears when you factor in higher growth forecasts and higher profitability for US companies. And once you adjust for differences in market structure and trading data, most of the gap in liquidity also disappears.

  
  

• Confirming the narrative: in some respects, the US market is more attractive. Levels of analyst coverage are higher than in Europe, the overall market is more dynamic with a culture that tends to celebrate success rather than be suspicious of it, and pay for chief executives is much higher. But higher levels of index investing are offset by the high bar for most European companies to be included in US indices.

  
  

• Towards a more dynamic market: we outline some directional reforms to help make European markets more attractive to companies and investors alike by reducing the chronic fragmentation in European equity market infrastructure; consolidating supervision and reducing the complexity of regulation across Europe; incentivising and building institutional and retail demand; developing a new narrative and a wider culture of investment rather than savings; and addressing wider challenges in the European economy.