Dollars and Jens
Thursday, March 18, 2004
Royal Dutch/Shell
I didn't know until reading Wednesday's Journal that Royal Dutch and Shell are not the same company, but two separate companies with merged operations. They've had combined operations since 1907, but Shell is still a British company, while Royal Dutch is, I believe, Swedish. The WSJ article is still available to subscribers online. Here's a taste:
Royal Dutch/Shell Group's admission in January that it overstated petroleum-reserve data has stung investors in both stocks of the Anglo/Dutch oil concern. But not in exactly the same way.

In the week following the news, shares of Royal Dutch Petroleum Co. fell, in dollar terms, 9.6% on the Amsterdam Stock Exchange. Shares of Shell Transport & Trading Co. in London fell a little more -- 10.1%. At the end of January, the relationship flipped, with Royal Dutch's stock having lost more ground than Shell following the reserve announcement. As of Tuesday, the tally had flipped back, with Royal Dutch down 8.1% and Shell down 8.7% from the January announcement.

This divergence isn't, strictly speaking, supposed to happen. In 1907, Holland's Royal Dutch and Britain's Shell agreed to combine their interests on a 60%-40% basis while remaining separate entities. Because they share the same profits and dividends, the two companies should trade lock step with one another.
I'm told that Shell is typically trading at a discount, as it is now, according to the Journal.

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