Finance Shell Essay

1278 words - 6 pages

Re: Global Equity Markets: The Case of Royal Dutch and Shell

Structure: The Royal Dutch/Shell Group is different because it appears that it is functioning as a single company instead of two separate companies. Yet, they are functioning as two separate companies. The Shell Company in the Netherlands, the Shell Company in the UK and the Shell Petroleum Company in the USA all appear to be maintaining their own identities in their respective countries. The Royal Dutch and Shell Company share equally in the Shell Company in the Netherlands, The Shell Company in the UK and the Shell Company in the U.S. They are not separate companies since they are linked by corporate charter. There is a ...view middle of the document...

It also allows companies to avoid some of the legal approval process by the SEC. Investors may shy away from buy foreign stocks but an ADR makes the process simple. ADRs are equivalent certificates traded in the U.S. and issued in exchange for the shares of foreign entity kept at a depository bank Companies that issue ADRs make their stock available to the U.S. market and investors and eliminate some of the barriers to acquiring foreign capital.

Price Differential: The price differential of Royal Dutch/Shell according to Exhibit 8 is Europe 13.80% and New York 11.71%. Shell trades at a significant discount to Royal Dutch and Europe offers a small discount .01% to New York. One reason for the price differential may be the taxes in the different countries. Exhibit 3 shows that Royal Dutch is owned mostly in the U.S. and in the Netherlands while Shell is owned mostly in the UK. The 60/40 split between Royal Dutch and Shell may be because of tax laws. The case mentioned that “pension funds sometimes faced tax asymmetries from with respect to the two stocks.” It went on to say that in the Netherlands pension funds were exempt from withholding taxes on Royal Dutch but not on Shell.

Another reason may be the differences in currency for the respective countries which would result in a difference in dividends. According to the case Exhibit 10 shows the difference between Royal Dutch and Shell ADR returns from New York. “The return differential was regressed on three indices and two exchange rates.” The table show the beta based on local currency.

Arbitrage Opportunities: Based on the price differentials I believe that there are arbitrage opportunities. One arbitrage transaction is to sell your stock in Royal Dutch and buy shares of Shell stock. The investor would then sell his/her shares of Shell stock and buy Royal Dutch. Another arbitrage transaction would be to short Royal Dutch stock. The investor would then buy Shell and eventually sell Shell and buy back Royal Dutch. Another arbitrage opportunity would be to enter into the swap agreement that was mentioned in the case in which you would exchange the total return on one instrument for the total return on another, plus or minus a fee, where the total return on an instrument is its price appreciation or loss during the holding period, plus interest or dividend income paid on the instrument during the holding period. The third option would be to enter into a swap with the Wall Street firm.

Net Payoffs: The case stated that the one way commission is 5cents per share. New York has a two way commission of 10 cents giving us a 25 cent commission. Shell...

Other assignments on Finance Shell

Research Method Mgt Essay

3321 words - 14 pages ) Bulb Shell Total Employee : 750 The Company The Bengal Glass Works Ltd. is one of the respected and reputed business houses in Bangladesh. It has just crossed 43 years of operation. Bengal Glass Works Ltd. has endured turbulences of the last 43 years and has been able to transform itself from a small manufacturing company into a leading business house. This is, indeed, a milestone, which Bengal Glass Works Ltd. has achieved with

Historically The State Has Been The Main Engine Of Development

1287 words - 6 pages -typical tendency. British colonialism in Nigeria created a highly distorted state that readily evolved into a neo-patrimonial and ineffective set of political organizations. Britain ruled Nigeria on the cheap, expending as little energy as possible. Within the shell of a modern colonial state and cloaked in the ideology of indirect rule, the British essentially utilized various "traditional" rulers to impose order. Colonialism in Nigeria thus

Cisco Master Acquirer

1063 words - 5 pages Mergers and acquisitions (abbreviated M&A) are both aspects of strategic management, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture. Mergers and acquisitions activity can be

Investment Banking Guide

3752 words - 16 pages   doors  for  you  should  you  decide  to  leave  banking  and  pursue  another  position  in  Finance.   We  won’t  sugarcoat  the  recruiting  process.    If  you  do  not  attend  a  core  recruiting  school  for  the  banks,   your  efforts  will  be  self-­‐directed  and  you  will  most  likely  shell  out

Organizational Analysis

1655 words - 7 pages that children in an impoverished area possess. Drug Free Communities is an initiative that was formed shortly after a group of teenagers were murdered on prom night. They were murdered because they decided to go to the wrong part of town to purchase marijuana and happened to be at the wrong place at the wrong time. This was a shell shocker in our community. The teenagers happened to walk into a drug gang from a larger city that had a local

2g Scam

5398 words - 22 pages Govt’s point of view: this method may look good, because now we can earn more money per ticket sold and use that money to finance whatever Development scheme we’ve in our mind. Now the problem: if Person B was a doctor, and he had to shell out Rs.500 for one movie ticket. Then he may charge more fees from patients at his clinic to keep the profit margin same. So overall effect on economy was not good. What is CAG? The Comptroller and

Top Bangladeshi Business Icon

6525 words - 27 pages in mind, Abed joined the Chartered Institute of Management Accountants in London, completing his professional education in 1962. Work Abed returned to East Pakistan (now Bangladesh) to join Shell Oil Company and quickly rose to head its finance division. His time at Shell exposed Abed to the inner workings of a large conglomerate and provided him with insight into corporate management, which would become invaluable to him later in life. It was

The Fall Of Enron

4627 words - 19 pages that there had been no official announcement that the project had been cancelled. Almost $200 million had been listed on Enron’s records as such “profits” by 2001. Secondly, for some of its financial transactions, Enron relied on investments by special purpose entities. Ideally, special purpose entities are shell firms funded by independent investors or debt financing and are used to hedge the risks involved in large transactions or acquisitions

Term Papaer

3314 words - 14 pages of crime was the use of special purpose entities which is limited partnerships or companies created to fulfill a temporary or specific purpose to fund or manage risks associated with specific assets. The shell companies were created by a sponsor, but funded by independent equity investors and debt financing. Till 2001 Enron Corporation had used hundreds of special purpose entities to hide its debts. Enron used a number of special purpose


8494 words - 34 pages 12Vdc car battery in times of reduced sun.  Its battery capacity is 2.5 Ah and has 2.5W of power.  The solar traffic light is made of solar cell, battery, controller, and LED lamp board.  It keeps working in cloudy days with 5-7 days on cloudy or rainy days.  The shell of the lamp is made of aluminum alloy castings with compression casting.  * EcoSuny Ecosuny manufactures solar billboard lighting systems that uses laminar design.  The solar


714 words - 3 pages The first ethical issue presented in the ethics game simulation was whether to warn consumers about the contaminated product and what information to provide consumers about the contaminant. The second ethical issue was whether to sell a product that does not meet U.S. safety requirements in a foreign market that has lower safety restrictions. G-BioSport was not required to meet prior approval from the Federal Drug Administration before they

Similar Documents

Business Environment Essay

4002 words - 17 pages of different resources of energy. To maintain the trust in the organization Shell provides dividends for shareholders. b) Employees Employees are important internal stakeholders for Shell. The numbers that Shell employs are over 100,000 worldwide. The employees are specialized in various domains like oil and gas exploration, finance, sales, marketing other domain that Shell activates. (Shell, 2014) Shell provides high compensation with

Shell Company Essay

8278 words - 34 pages Royal Dutch Shell PLC RDS.A [pic][pic][pic][pic][pic] [pic][pic] [pic] | | |[pic][pic] | |[pic] | |[pic

Sir Fazle Hasan Abed, Chairperson, Brac And Dr. Caroline Harper, Chief Executive, Sightsavers

2795 words - 12 pages a career in Naval Architecture would make returning home difficult. With that in mind, Abed joined the Chartered Institute of Management Accountants in London, completing his professional education in 1962. Abed returned to East Pakistan (now Bangladesh) to join Shell Oil Company and quickly rose to head its finance division. His time at Shell exposed Abed to the inner workings of a large conglomerate and provided him with insight into corporate

Enron Ethics Issues Essay

1839 words - 8 pages by outside investors. Enron utilized its own stocks and assets to finance the shell corporations. So in reality, Enron should have been recognizing the liabilities, rather than understating them. As time went on, the number of shell corporations grew into the hundreds for Enron to be able to maintain the expectations of Wall Street. When the Board of Directors was questioned or asked about information in their financial practices of the