The Guardian (UK): Coin clipping: “Rather than simplifying Shell's life on the markets, the oil group's move to consolidate both its board and shareholder structure - consummated on Tuesday - has had the opposite effect.”: Thursday 21 July 2005

Rather than simplifying Shell's life on the markets, the oil group's move to consolidate both its board and shareholder structure - consummated on Tuesday - has had the opposite effect.

The traditional market game of playing the small pricing discrepancies between the old British entity, Shell Transport & Trading, and the old Dutch entity, Royal Dutch (caused by differing tax treatment, dividend anomalies and exchange rate movements) is one of the oldest known arbitrage opportunities. Some men, and even possibly a few women, have spent entire careers in the City of London playing it.

The unification of Shell - hurried by last year's oil reserves scandal - might have put an end to such coin clipping, except that we now in effect have four different types of shares: A and B shares traded in London, and then A and B shares traded in the Netherlands through Euronext.

Most of the old differentials, involving tax and currencies, are still in play, but we now have an important new variable (as far as British-based investors are concerned) in that Shell stock traded in Amsterdam is free of stamp duty.

For arbitrageurs, this spells another trading opportunity. For the City and the chancellor it is more of a concern, since trading in what is one of our largest companies is now likely to move abroad. Even more worrying is the fact that the fortunes of a good portion of Britain's pension savers are tied to Shell. Along with BP, these two oil companies now account for nearly 20% of the FTSE 100.

Like it or not, millions of Britons' retirement benefits are now linked to the oil price. Call it financial climate change. 

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