Australian stock prices soared 20% compared to London, hedge funds pressured Rio Tinto plc Sponsored ADR (RIO.US) to reform the "same stock, different fate" situation.

Hedge fund Palliser Capital, based in London, urged Rio Tinto plc Sponsored ADR (RIO.US) on Monday to allow its Australian shareholders to vote on a resolution seeking an independent review of the company's dual-listed status. The resolution aims to review the dual-listed structure of Rio Tinto plc Sponsored ADR, with Palliser stating that this structure is inefficient and "value destructive." It is understood that the resolution proposed by Palliser will be voted on by British shareholders of Rio Tinto plc Sponsored ADR at the annual general meeting in London on April 3, but it is not included in the agenda for the Australian shareholder meeting to be held in Perth on May 1. Palliser stated in a letter to Rio Tinto plc Sponsored ADR that this deprives Australian shareholders of the right to vote on issues that are equally important to them. The company structure of Rio Tinto plc Sponsored ADR requires two separate annual general meetings: one for shareholders of Rio Tinto plc Sponsored ADR Limited Company listed in London (Rio Tinto plc), and another for shareholders of Rio Tinto plc Sponsored ADR Limited Company listed in Australia (Rio Tinto Limited). A spokesperson for Rio Tinto plc Sponsored ADR stated that Palliser has submitted a requisition notice to Rio Tinto plc Sponsored ADR Limited Company but has not submitted a requisition notice to its Australian subsidiary. The spokesperson also stated that Palliser has informed them of their intention to submit a requisition notice to the annual general meeting of Rio Tinto plc Sponsored ADR Limited Company and has been advised on how to proceed. Palliser has not commented on whether they have submitted a requisition notice. About 77% of investors in London-listed Rio Tinto plc Sponsored ADR are Rio Tinto plc Sponsored ADR investors, but the stock trading price in Australia is about 20% higher than in London, partly because Australian shareholders can enjoy tax benefits. Barrenjoey analyst Glyn Lawcock said, "If you are a Rio Tinto plc Sponsored ADR shareholder, why wouldn't you want your stock to rise by 20%?" To balance the listings more closely, Rio Tinto plc Sponsored ADR will either buy back its stock listed in London or raise funds in Australia. Rio Tinto plc Sponsored ADR stated that after acquiring lithium miner Arcadium for $6.7 billion, it is considering raising funds in Australia to support its balance sheet. It is worth mentioning that a major obstacle to repurchasing London-listed stock is that Aluminum Corporation Of China (Chinalco) holds nearly 15% of Rio Tinto plc Sponsored ADR's London company, and under the guarantees made after acquiring these shares in 2008, it cannot increase its shareholding without approval from the Australian government. A source familiar with Chinalco's intentions stated that the state-owned enterprise wants to maintain its holdings and does not want to buy or sell Rio Tinto plc Sponsored ADR shares. Chinalco did not immediately respond to requests for comment. Another option for raising funds would dilute the holdings of existing Australian shareholders. Analyst Jack Gabb from Sydney investment firm Pendal Group stated, "From a balance sheet perspective, increasing share capital makes no sense. If there are valuation issues in the UK, they should be addressed through buybacks. This should not come at the expense of the Australian listing."