Rio Tinto, the globally renowned mining giant, is facing pressure to move its primary listing from the London Stock Exchange to Australia. This suggestion comes from Palliser Capital, a UK-based activist investor, which argues that such a move could potentially boost the miner’s share price by nearly 40%.
Palliser Capital, an asset manager with around $850 million under management, asserts that Rio Tinto’s dual-listed structure—which consists of distinct corporations in Australia and London—has hindered the company’s capacity to participate in all-stock takeovers successfully. The Financial Times said that Rio Tinto’s Australian subsidiary and its London-listed counterpart are valued at a significant $27 billion difference.
These observations were made by Palliser Capital’s Chief investing Officer, James Smith, during the Sohn Hong Kong investing conference. After leaving Elliott Investment Management in early 2021, Smith founded Palliser and criticized the dual structure, calling it “very clumsy and archaic.” Smith spearheaded a triumphant effort at Elliott against BHP, another massive mining corporation, compelling it to escalate share buybacks and forsake its own Anglo-Australian dual listing in 2017.
The proposal to shift Rio Tinto’s main listing to Sydney comes as other major companies on the London Stock Exchange contemplate similar moves. For instance, Shell announced in April its consideration to leave the LSE, citing European investors’ growing disinterest and even hostility towards fossil fuels.
With a market valuation of £98 billion ($125 billion), Rio Tinto is currently the ninth-largest business on the FTSE 100. Like BHP’s departure two years ago, which also moved its main listing to Sydney, a move similar to the one contemplated may have a big impact on the FTSE 100.
Rio Tinto’s UK-based Plc and Australia-based Ltd businesses’ shareholders would need to approve such a structural shift. Remarkably, investors in Rio Tinto’s UK business own almost 77% of its share capital, even though a sizable amount of its income come from operations in Australia. This allocation of investors is different from BHP’s prior to its restructuring, which favored its Australian subsidiary more.
Despite the potential benefits outlined by Palliser Capital, Rio Tinto’s management has previously indicated that restructuring the dual-listed company is not a priority. Jakob Stausholm, Rio Tinto’s chief executive, mentioned in a February earnings call that addressing the dual-listed corporate structure was “the least important issue” in his view. He acknowledged only “marginal benefits” to such a change, including the simplification of head office functions and the elimination of duplicate annual meetings and listing fees.
