When Unilever (ULVR) announced in March that it would drop its dual-headed legal structure in favour of a Dutch headquarters, many wondered what this would mean for its London listing. Chief financial officer Graeme Pitkethly has now said that after extensive discussions with FTSE Russell it is “extremely unlikely” the consumer goods giant will continue to be included in the FTSE 100 index. As a result, Unilever’s weighting in the pan-European indices will increase.
This means that funds or investment strategies that own Unilever shares because they track a UK index will have will have to drop their holding when the company is excluded. Unilever will maintain a premium listing in London and Mr Pitkethly said he hoped affected investors would have “sufficient flexibility” within their portfolios to continue to hold Unilever. Those vehicles that are bound to the FTSE 100 would have to sell their holding entirely, but ones that can hold London-listed companies in general might just have to reduce their stake.
A forced sale could cause the share price to slide, but this would not happen all at once. Liberum analyst Anubhav Malhotra said there are mechanics in place so that those investors that must sell don’t have to do it all in one go. Instead they could phase their position to zero over a period of time. Still, there would be downward pressure, he said.
