Flutter, the FTSE 100 gambling firm that owns Paddy Power, Betfair and Sky Bet, has been teasing us for the past year about moving its primary share listing to the US “in due course”. Now, on the first day of New York trading in its shares in add-on secondary form, the company says it likes the place so much it wants to go all in.
Shareholders will vote in May on a proposal to relegate the London listing to secondary status, which would amount to making it virtually irrelevant, and adopt New York for the primary. The lure of membership of the S&P 500 index beats the (dwindling) prestige of the Footsie.
Flutter – a top-20 stock with a market value of £28bn – is a bad one for London to lose. Other high-profile departures had stronger stories to tell. BHP Billiton was always Australian, so Sydney was the right venue to unify a clunky, dual-headed corporate structure. Plumbers’ merchant Ferguson had sold almost all of its UK assets by the time it left.
Flutter’s arguments are sketchier. While everybody understands that the US gambling market is booming and will soon represent the company’s biggest geographical source of profits, it doesn’t necessarily follow that the “natural home”, as chief executive Peter Jackson puts it, for the shares must also be the US. Many large Footsie companies, from AstraZeneca and Shell downwards, make substantially more money in the US than they do in the UK. Indeed, about 75% of Footsie firms’ aggregate earnings are estimated to come from overseas.
Flutter is perhaps unusual in that its head office is in Dublin and past acquisitions, including the purchases of FanDuel, the US operation, and Canada-based PokerStars have added to the international flavour on the shareholder register. These days, US-based investors own 53% of the shares, according to Bloomberg data. Even so, if alarm bells weren’t already sounding at the London Stock Exchange Group (and chief executive David Schwimmer often gives the impression he hasn’t heard them), they should be now. You can’t live for ever off past Anglo-Dutch unification victories for London such as Unilever and Relx, especially when you failed to bring Arm Holdings back to the UK market.
The exchange could do with some help from the dwindling band of UK loyalists. While US shareholders dominate at Flutter, the UK-based percentage is still 21.4%, which is not nothing in the context of a special resolution that requires a 75% majority. How should the UK crew respond to Flutter’s intended flight? One hopes they vote against. It would at least send a message to other wannabe escapees in UK boardrooms that exiting to the US is not as easy as flicking a switch.
For those funds that are allowed to own stocks only within UK or European indices, this ought to be a no-brainer. They will become forced sellers of a company with good long-term growth prospects and won’t receive a takeover premium by way of compensation. From where they sit, that proposal should have zero appeal. It is a moment to be irritating in a (probably) doomed cause.
