Royal Dutch Shell announced quarterly earnings Thursday, including profit growth that didn’t meet investor expectations, while company executives were grappling with an activist fund’s proposal to break up the oil giant.
Third Point, a New York-based activist fund management firm, bought a stake in Shell and called for it to be split into “multiple independent companies” that could appeal to competing shareholder interests.
Third Point CEO Daniel S. Loeb said in a letter to investors that these companies could include a unit covering Shell’s legacy oil and gas extraction business and a unit covering its renewable energy and liquefied natural gas businesses.
Mr Loeb described Shell as “one of the cheapest big-cap stocks in the world”. He also said that despite what Shell calls “higher quality and more sustainable” businesses, it’s trading at a 35 percent discount over its rivals Exxon Mobil and Chevron by most measures.
He blamed Shell for the lack of investor interest in the company’s “trying to satisfy multiple interests but not satisfying any of them”.
Shell said that we have “preliminary discussions with the Third Point and we will engage with them as we do with all our shareholders”.
Third Point’s move is reminiscent of the successful battle waged by another activist hedge fund this spring. number 1 engineappoint three executives to the board of directors to force Exxon Mobil to reduce its carbon footprint.
News of Point Three’s relevance came when Shell, Europe’s largest oil company, reported $4.1 billion in adjusted earnings for the third quarter of this year; this is mainly due to high oil and gas prices. Earnings came in below analysts’ expectations.
Shell shares fell 3%.
Emily Flitter contributing reporting.