Hedge fund Third Point has built a large stake in Royal Dutch Shell. They called on the oil major to split into multiple companies. This is for increasing its performance. Billionaire investor Daniel Loeb’s New York-based firm, owns roughly $750 million in Shell. Shell’s market value is nearly $190 billion. Shell, faces mounting pressure from investors and governments. Loeb told that Shell has an incoherent set of strategies for its various oil, chemicals, trading and renewables businesses.
Shell is expected to report third-quarter results, confirmed it has had preliminary talks with Third Point. The statement says that it regularly reviews and evaluates the company’s strategy with a focus on generating shareholder value. Loeb’s letter did not say how many separate companies it wants Shell to form. They should consider separating its legacy energy business from its liquefied natural gas, renewables and trading businesses. Shell has too many competing stakeholders pushing it in too many different directions. Shell would benefit from a different structure that would let it cut costs and invest more in decarbonization.
Shell’s reported $5.53 billion from oil and natural gas, $1.3 billion from refining, trading and marketing, and $670 million from chemicals. Loeb said Shell’s last two decades have been difficult for shareholders with annualized returns of just 3%. The company’s American Depository Receipts rose 2.5%. Third Point’s focus on Shell comes amid broader investor scrutiny of Big Oil. Hedge fund Engine No. 1 took a $40 million position in Exxon Mobil and won three seats on its board this year. Third Point, which manages about $17 billion in assets, has previously pushed insurer Prudential Plc to break up and urged chip maker Intel Corp to explore separating its chip design from its semiconductor production.
The hedge fund has returned 29.5% in the first three quarters of 2021 and its Third Point Offshore Fund has returned an average 15.5%. Shell is the world’s biggest fossil fuel retailer. Smaller Shell rivals Eni and Repsol have already flagged plans to spin off parts of their renewable’s businesses.