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Wall Street activist Dan Loeb says Shell risks becoming ‘tarnished’ unless it heeds his break-up call

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Wall Street activist Dan Loeb says Shell risks becoming ‘tarnished’ unless it heeds his break-up call

Loeb’s Third Point Investors has been pushing for a break-up of Shell, calling its current business ‘confusing and unmanageable’

By Oscar Williams-Grut City Editor @OscarWGrut: 9 May 2022

The Wall Street activist pushing for a break-up of Shell has raised his stake in the business and said the oil giant risks becoming a “tarnished legacy brand” without reform.

Third Point Investors, a hedge fund run by billionaire Dan Loeb, said in a quarterly investor update that it had “continued to add to our position in Shell” in the first few months of 2022 and held “constructive” talks with the company.

Third Point first invested in the energy giant last autumn and publicly called for a break-up of the company between its oil and gas business and its newer clean and green energy arm.

Loeb said in his latest investor letter that he and his team “are engaged in discussions with management, board members, and other shareholders, as well as informal talks with financial advisors.”

“We have discussed various alternatives with the aim of both increasing shareholder value and allowing Shell to effectively manage the energy transition,” Loeb wrote. “We have reiterated our view that Shell’s portfolio of disparate businesses ranging from deep water oil to wind farms to gas stations to chemical plants is confusing and unmanageable.

“Most investors we have discussed this with agree that the company would be more successful over the long term with a different corporate structure.”

Shell CEO Ben van Beurden previously rejected Loeb’s calls for a break-up, saying in October: “Replacing long term, thoughtful investors by hedge funds is not necessarily beneficial for the transition. It’s all about symbolism, it doesn’t really make a contribution.”

Oil prices – and Shell’s share price – have both rallied strongly since Loeb invested after Russia’s invasion of Ukraine created a global oil supply crisis. Shell reported its highest ever quarterly profit last week.

Loeb acknowledged that Shell’s fortunes had shifted since his first push for reform last October.

“Fundamental and geopolitical events have highlighted the strategic importance of reliable energy supplies, especially in Europe,” Loeb wrote. “Shell’s LNG business, the largest in the world outside of Qatar, will play a critical role in ensuring energy security for Europe. In our view, the value of this business has increased dramatically since our original investment.”

But he insisted that a corporate shake-up was still necessary.

“Stakeholders clearly see these corporate changes as instrumental, particularly if Shell wishes to become a leader in the energy transition rather than be left behind as a tarnished legacy brand,” he wrote.

Shell was Third Point’s best performing investment in the first quarter, though the wider portfolio lost 11.5% of its value. That was more than double the 5% slump seen by the MSCI World Index over the same period and far worse than the 4.6% drop in the S&P 500.


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