Investing.com -- Elliott Management became the third-largest shareholder of British oil giant BP (NYSE:BP) by acquiring a near-5% stake valued at approximately £3.8 billion ($4.74 billion), the Financial Times reported Thursday, citing sources familiar with the situation.
Per the report, the activist investor is pushing for the company to significantly reduce its renewable energy investments and to execute major asset divestitures. Elliott’s stake in BP, which is one of its largest, may include both shares and derivative positions that mirror an economic interest in the company, a strategy previously employed in other campaigns.
BlackRock (NYSE:BLK) and Vanguard are the only shareholders with larger stakes in the FTSE 100 energy company, holding 9% and 5% respectively.
“The time for minor course corrections at BP is long gone,” a person familiar with Elliott’s thinking reportedly told the FT. “The level of undervaluation [of BP] is profound and the pathway to alleviate that undervaluation is clear and addressable.”
Elliott’s move comes after BP’s shares declined by about 30% from April to December of 2024, attributed to the company’s poor financial and operational performance, along with a perceived lack of strategic direction under CEO Murray Auchincloss.
However, the oil major’s stock has seen a 16% rebound this year amid market speculation that the company’s valuation might attract activist investors or a potential takeover bid.
The hedge fund’s involvement was made public on Saturday, and in response, Auchincloss pledged a "fundamental reset" of BP’s strategy while announcing disappointing results on Tuesday.
BP is scheduled to present its updated plans on capital markets day on February 26, 2023. It remains uncertain whether these plans will align with Elliott’s objectives.
Elliott, known for its assertive strategies in the energy sector, is advocating for a vigorous chair and proactive board to champion the proposed strategic overhaul at BP. The campaign at BP is led by John Pike and Gaurav Toshniwal, both of whom have a background in energy and industrial investments.
Pike has been involved in several campaigns with US oil companies such as Hess (NYSE:HES) and Marathon, as well as with Canadian oil sands producer Suncor and refiner Phillips 66 (NYSE:PSX).
According to the FT report, Elliott has indicated its willingness to maintain a long-term position in BP, with previous campaigns in Hess and Marathon lasting between six and eight years.