Elliott Management has taken a significant step in the corporate landscape by becoming BP’s third-largest shareholder, acquiring nearly 5% of the company’s shares, valued at approximately £3.8 billion. This move comes as Elliott seeks to exert pressure on the troubled UK oil giant to rein in its renewable energy investments and execute major asset sales.
This stake is one of the largest for the U.S. hedge fund and is likely to involve a combination of both traditional shares and derivative positions, a strategy Elliott has employed in previous campaigns. Under stock market regulations, Elliott must publicly disclose its holdings once it surpasses the 5% threshold.
Following BlackRock and Vanguard, which hold 9% and 5% of BP respectively, Elliott’s investment indicates a growing interest in the company’s financial maneuvers. According to sources familiar with Elliott’s strategy, the hedge fund believes BP has been significantly undervalued and that there is a clear fix to this issue.
Since 2020, BP has drastically increased its spending on energy transition projects, ramping it up from just 3% to between 19% and 40% of its overall capital expenditure, peaking at $4.9 billion last year. This investment has allowed BP to build a diverse portfolio powered by wind, solar, biofuels, and hydrogen. However, Elliott argues that this approach is misdirected and that BP should curb its future investments in renewable energy while divesting from many of its assets, including portions of its green operations.
The past year has been challenging for BP, with a striking 30% drop in share price from April to December due to its underwhelming financial results and perceived gaps in strategic direction from CEO Murray Auchincloss. However, in a slight turnaround, shares have risen 16% in the current year, fueled by speculation that the company might attract the attention of activist investors or even face a takeover bid.
Elliott’s involvement became widely known recently, shortly after Auchincloss committed to a “fundamental reset” of BP’s overall strategy amidst disappointing earnings reports. BP plans to reveal its new strategy during a capital markets day scheduled for February 26.
It remains to be seen if these proposed changes will meet Elliott’s expectations. The hedge fund hopes to see a proactive chair and an engaged board taking decisive action for the company’s transformation.
Leading Elliott’s campaign are John Pike, a veteran in energy and industrial investment, and Gaurav Toshniwal, who manages a focused energy portfolio in London. Pike has directed similar campaigns in various U.S. oil firms, including Hess and Marathon, as well as in other energy-related corporations. Recently, Elliott also increased its stake in Phillips 66 while urging the firm to divest its pipeline and chemical operations.
Sources close to Elliott suggest the hedge fund is prepared for a long-term commitment to BP, noting that previous campaigns at Hess and Marathon have typically spanned six to eight years.