Michelle ThompsonThe narrative that US listings outperform European ones has been widely accepted for years, but recent analysis reveals a different perspective.
Donald Trump is effectively illustrating that US stock markets don’t always outperform their European counterparts.
Unpredictable tariff disputes, threats to dismiss the Federal Reserve chairman, and general instability have led to a reassessment of the once-dull European markets. The S&P 500 has dropped 6% this year, while the FTSE 100 has risen by 2.5% and the pan-European Stoxx Europe 600 has gained 3%. Although the differences are not massive, they represent a shift from recent trends.
But will this be enough to halt the “exodus” of UK and other European companies to the perceived higher-value and more liquid US markets? The narrative of sluggish Europe versus dynamic US has dominated for years, with companies like Ashtead, Ferguson, and Flutter moving their primary listings to the US. Each departure has been seen as another setback for London.
However, a “reality check” report from the New Financial think tank should be considered by any UK-listed company board that believes their share price would be higher if listed in the US. The report reveals it’s not necessarily the case.
It identifies 130 European companies, including 51 from the UK, that have moved to the US over the last decade, through listing changes, first-time listings, or mergers with US shell entities. While the total is significant, valued at $676bn (£504m) at the time of the moves, it represents just 2% of the total number of European companies.
The London Stock Exchange. The FTSE 100 index has gained 2.5% this year.
A surprising finding from the analysis is the performance of European companies after moving to the US. It reveals that 70% of these companies are trading below their listing price, fewer than 20% have outperformed the S&P 500, and three-quarters have underperformed the European market post-move.
This data, however, is influenced by the poor performance of companies that joined the US trend of SPACs (Special Purpose Acquisition Companies). Of the 42 companies that pursued this route, nine saw their stock prices collapse (such as Cazoo and Arrival). Even among more established companies that simply changed listings, their performance is roughly neutral: 44% have outperformed the European market since the move.
Why is this the case? The premium valuation of US markets (about 30%) doesn’t always apply to individual companies or sectors. Much of the high US valuation comes from the significant weight of large, highly valued tech firms. As New Financial puts it: “US stocks have a higher valuation because they have higher growth and higher return on equity, not because they happen to be listed in the US.”
That said, moving to the US can make sense for certain companies. For example, Ashtead and Ferguson had effectively become US entities, while Sweden’s Spotify had likely outgrown its local market. It was probably commercially sensible for SoftBank to relist Arm Holdings, the UK’s top tech company, in the US, where it could compete with companies like Nvidia. The US also has advantages for the biotech sector.
However, the key takeaway is that the grass isn’t always greener, especially when it comes to executive pay, which might be a driving factor in some decisions. While there have been successes—such as Arm—the overall performance of companies that moved suggests that it’s not a cure-all, as the report points out.
The report doesn’t suggest complacency but advocates for reforms to make European stock markets more cohesive. However, in the broader scheme of market concerns, the trend of US market migration may not be the biggest worry, especially with the uncertainty brought by Trump-like volatility.
What is more alarming, according to the report, is that 1,000 listed companies in Europe, worth over $1 trillion combined, have been acquired by private equity or taken private in the past decade. The ongoing dominance of private equity remains a greater threat to public stock markets.
