Transocean's Swiss Exit Marks the End of an Ill-Starred Listingby
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Transocean Ltd. began trading on the Swiss exchange on April 20, 2010. Its first day proved to be its best day, and now its experiment as a listed company in the Alpine nation is ending.
Hours after its debut, an explosion at one of its oil rigs run by BP Plc in the Gulf of Mexico led to the worst environmental disaster in U.S. history. The extended fallout has been compounded by a slump in oil prices amid a glut of new drilling vessels and a slide in contracts, wiping out almost 90 percent of the shares’ value. So after five years and scant trading, Transocean decided to delist.
In a country more famous for its banks, drugmakers, chocolates and watches, demand for exposure to the only oil-related stock in the Swiss Market Index was very low. For Joerg Lorenz, a fund manager of Swiss equities at Zurcher Kantonalbank, the exit makes sense.
“What is the Swiss element in Transocean? Zero.” Lorenz said. “It really isn’t a core competence for Switzerland to trade oil-related stocks. It’s a foreign company and its operations are not based here.”
Transocean, which will continue to trade on the New York Stock Exchange, closed at 12.68 francs on Friday in Zurich. It may be delisted from the Swiss stock exchange as early as mid-March, as it seeks to slash $1 billion in costs following a tumble in third-quarter revenue and gloomy outlook for 2016.
“It costs money to be listed on different exchanges and they want to save some,” said Laurent Bakhtiari, a market analyst at IG Bank in Geneva, Switzerland. “The liquidity and volumes in Switzerland are very small. Strategically it makes sense.”
While the stock’s performance in New York has mirrored the slide in Switzerland, more than 12.6 million shares change hands each day -- five times more than the average trading volume for the Swiss franc-denominated stock.
“Due to the expense and effort associated with multiple listing locations, we do not think it is in the company’s best interest to be listed on two exchanges this time,” Pam Easton, a spokeswoman at Transocean, said in an emailed response to questions from Bloomberg. “Shareholders will need to contact their licensed brokerage firms where they purchased their shares.”
According to Bakhtiari, the outcome of the delisting isn’t clear for holders of the Swiss shares. Most likely they will get rights in a private entity -- which will be difficult to trade and evaluate -- because other options like exchanging Swiss shares for U.S. ones or buybacks are more expensive or would require approvals from different authorities.
The SIX Exchange Regulation must give the delisting date by the end of this week, according to SIX spokesman Stephan Meier. Shortly afterwards, SIX will also announce Transocean’s replacement in the SMI -- a gauge of the biggest and most liquid 20 stocks traded in Switzerland -- where it has the smallest weighting of just 0.43 percent. When it first became part of the index, it had a 2.6 percent weighting.
Based on current market value and trading activity, insurer Swiss Life Holding AG -- which was nudged out by Transocean in 2010 -- or hearing-aid maker Sonova Holding AG, will most likely replace Transocean, Meier said.
“In 2010, we couldn’t believe that the commission included Transocean in the index -- there was a lot of frustration among the Swiss institutional investors,” Lorenz said. “It was a clear mistake.”