Does it really matter to investors where a company HQ is located? In the case of Unilever (LSE: ULVR), it just might. The global giant’s plan to revamp its dual-headquarter structure that currently means one foot in London and the other in Rotterdam in favour of a Netherlands focus is coming under fire from major shareholders.
The intended move is, according to the company, nothing to do with Brexit — so the timing is just a coincidence, then. But Aviva Investors, which holds 1.4% of Unilever’s stock, is set to oppose the move at the upcoming vote, saying that it would have only downsides for those in the UK.
Bye bye Footsie
The biggest issue, according to Aviva Investors’ chief investment officer David Cumming in an interview with the BBC, is that Unilever’s move away from the UK’s capital would lose it the right to a FTSE 100 listing and that could force UK institutional investors to sell their shares. It will still have a London listing, but even with this, the new Dutch-based company would not even qualify for the FTSE 250 or FTSE All-share indices either.
With a market cap of more than £115bn, Unilever is currently the third biggest company on the London stock exchange. Part of Aviva’s concern is that a significant chunk of its funds go to tracking the UK’s major indices, and it would face upheaval and expense in having to reallocate cash away from Unilever.
And even if the only investors forced to sell were the tracker funds, they do hold a fair chunk of the capital so that could be enough to hit the share price. In fact, Unilever shares have already lost 5% of their value so far in September, as nervous investors are presumably trying to pre-empt any possible bigger share price falls.
Shareholders’ revolt
Aviva Investors isn’t the only big shareholder likely to vote against the move, as Lindsell Train, which holds 2.5% of the company, has also voiced concern over being forced to sell out “at a time and price not of our choosing.”
Is it possible that the planned move can be defeated? Well, Unilever needs a 75% majority in favour, so it’s not outside the bounds of possibility that it could lose this one — although the board is probably confident it has the support it needs.
What should an individual shareholder do? If you’re registered to vote, you can make your voice heard. I don’t know how much of Unilever stock is in the hands of small investors, but even a few percent could make a difference.
But the move shouldn’t actually make any direct difference to smaller UK shareholders. Its retention of a London listing means that in theory, they should be able to carry on buying and selling their Unilever shares just as easily as they can today. Whatever you do, there’s no need to panic and if the share price does fall, it could be a good chance to buy in.