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(Sharecast News) - Activist hedge fund Palliser Capital urged Rio Tinto to shift its primary stock market listing from London to Sydney, it emerged on Thursday, to potentially increase its share price by nearly 40%.
According to the Financial Times, Palliser Capital's chief investment officer James Smith believed Rio Tinto's current dual-listed structure, with a primary listing in London and another in Sydney, was outdated and hampered the mining conglomerate's ability to pursue all-stock takeovers.
The dual structure had resulted in Rio Tinto's London-listed shares trading at a $27bn discount compared to its Australian shares, Smith reportedly explained during a presentation at the Sohn Hong Kong investment conference.
Palliser, which holds less than a 1% stake in Rio Tinto valued at several hundred million pounds, believed that the switch would rectify the undervaluation caused by the dual listing.
Should Rio Tinto follow Palliser's recommendation, it would echo a move made by its rival BHP, which shifted its primary listing to Sydney two years ago.
It would also result in Rio Tinto exiting the FTSE 100 index, where it is currently a major component.
In addition to addressing the undervaluation, Smith argued that scrapping the London listing would allow Rio Tinto to tap into significant tax credits available to Australian investors.
Reporting by Josh White for Sharecast.com.
