The real reason why some companies are moving to the US

Sometimes, you come across a story that seems too good to be true. But it appears the real reason why some UK companies moved their listing from the UK to the US was… the weather. Let me explain.

The other day, I was having drinks with a friend of mine who works at a UK-listed company. The management of the company has significant business in the US, so they have been wondering if it wouldn’t be better for their shares to be listed in New York rather than London.

The typical argument is that in the US, there is more liquidity and valuations for shares are typically higher than in Europe, so investors could get an almost instant boost to their holdings.

What surprised me in this case, though, was to hear the reason why this company decided to move to the US. Apparently, a shareholder had sent them a research study that investigated how the weather influences earnings calls.

The main results from the study were that CEOs and CFOs are influenced by the weather on the day and at the location of the earnings call. If the weather is grey and cold, as it often is in the UK, executives are in a worse mood and that changes their tone at the earnings call and the words and phrases they use to describe their business and its outlook.

When the weather is bad, executives use a more subdued tone, reduce the use of quantitative information by 0.06% and increase words that express uncertainty by about 3.3% in the Q&A section of the earnings call.

And such small changes in tone and vocabulary are enough to slightly alter the perception of analysts and investors on the earnings call. The result is that when the weather is bad on the day of the earnings call where the company executives are, the share price drops by an extra 0.12% on the day of the earnings call.

Said my friend: “The top brass always wanted to have an excuse to move to Florida, and once they had one, there was no turning back.”