Rio Tinto should scrap its primary London listing, activist hedge fund says

By Louis Goss

Rio Tinto should scrap its primary London stock market listing and switch its primary listing to Sydney, in order to boost its share price by "nearly 40%", an activist hedge fund has reportedly said.

Palliser Capital said Rio Tinto's dual corporate structure has made it more difficult for the mining conglomerate to pursue all stock takeovers, as its London-listed entity is currently at a $27 billion discount to its Australian one, the Financial Times reported.

"What we think is the root cause of the undervaluation is an extremely clunky and outdated dual-listed corporate structure," Palliser's chief investment officer James Smith reportedly said in a presentation at the Sohn Hong Kong investment conference.

Palliser, which is based in the west London district of Baron's Court, owns a less than 1% stake in Rio Tinto, which is currently the hedge fund's largest position, worth several hundred million British pounds.

Shares in Rio Tinto (UK:RIO), listed on the London Stock Exchange, were up fractionally on Thursday, having gained 20% in the past year. Rio Tinto's (AU:RIO) Sydney listed shares were down 2% having advanced by 27% over the previous year.

Any push to scrap its primary London-listing would see Rio Tinto follow in the footsteps of its main rival BHP (AU:BHP), which switched to Sydney two years ago, and also see the mining giant leave the FTSE-100 UK:UKX index of which it is currently a major component.

Palliser was started by Smith in January 2021 after he left Elliott Investment Management - the activist hedge fund that was started by Paul Singer in 1977 - where he had worked as its Hong Kong chief.

At Elliott, Smith led a successful campaign against BHP which saw the hedge fund manager call on the mining firm to increase share buybacks and scrap its own Anglo-Australian dual listing in 2017.

In March, Palliser recruited former Elliott portfolio manager Steve Kasoff to drive its expansion into the U.S.. The London hedge fund last December was revealed to have launched an activist campaign against Samsung, Reuters reported.

In his presentation in Hong Kong on Thursday, Smith also argued that scrapping its London listing would give Rio Tinto new access to billions worth of tax credits that Australian investors are entitled to.

Rio Tinto and Palliser Capital were approached by MarketWatch for comment.

-Louis Goss

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05-23-24 0806ET

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