Halliburton (NYSE:HAL) has created a PR storm that few comprehend. The official spin is that they are moving something called headquarters to be closer to the market, which they perceive to be the Middle East. Most generals do not place their headquarters in the middle of the battlefield. Many global companies operate around the world and do not locate head offices in a major market.
The geo-political perspective will provide more insight than the straight financial perspective. Most observers cannot figure the Middle East out. By embedding your head office in a more politically complicated environment, you are not providing more clarity for investors. The move has disturbed the American political scene unnecessarily. Many claim Halliburton is becoming a tax refugee.
By moving outside of the U.S., Halliburton will be able to avoid political and regulatory scrutiny. Oil exploration requires close involvement with dictators and other corrupt elements. It makes for good headlines, but we want our gas station full of gas for our convenience.
International banks have long engaged in jurisdiction shopping as they sought out tax effectiveness and secrecy laws to their liking. But banks are intermediaries and act on behalf of clients. Halliburton is a direct participant and gets its hands dirty.
Methinks somewhere there is a contract/deal/venture that is so juicy that Halliburton is prepared to take the political heat in America. You would not do this just to get a few rigs into place. The move is entirely customer-centric.
Disclosure of all varieties financial and political will be more obscured. Therefore the beta has increased dramatically. Many investors may find the newly increased risk reward unpalatable. Approximately 657 institutions and mutual funds now hold 82% of shares. Markets dislike uncertainty and will act accordingly.
Related: Why Halliburton's Move to Dubai Makes Cents
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