Activist investor Dan Loeb’s fund praised Shell Plc’s new management team for prioritizing investor returns and cutting costs.
(Bloomberg) — Activist investor Dan Loeb’s fund praised Shell Plc’s new management team for prioritizing investor returns and cutting costs.
The oil giant’s new Chief Executive Officer Wael Sawan and Chief Financial Officer Sinead Gorman “have demonstrated an unwavering commitment to shareholder value, capital discipline, and improved returns,” Third Point LLC said in an investor letter dated July 31. It also applauded the company for eliminating “meaningless targets.”
Loeb’s fund took a $750 million stake in Shell in 2021 — which it later increased — and called for then-CEO Ben van Beurden to break off the company’s liquefied natural gas, renewables and marketing businesses into a standalone entity.
Since taking the helm in January, Sawan has pledged a “fundamental culture shift” and promised that management would become more accountable with a “ruthless” focus on performance and financial discipline. Shell is pushing its global renewable power operations to become more profitable and is exploring options for the unit including a potential stake sale.
Sawan and Gorman have backed “up their words with actions” by canceling projects with low returns and increasing shareholder payouts, according to Third Point. Last week the London-based major committed to repurchasing at least $5.5 billion of shares in the second half of the year.
Third Point sees Shell as “a compelling investment” because its shares are trading at a “staggering discount to intrinsic value,” according to the letter. The fund said that the company could generate shareholder returns in the mid-teens through share-price growth and dividends to the end of the decade.
“While Shell has so far insisted on maintaining its conglomerate structure, we see positive signs that it has arrived at a coherent and compelling strategy for value creation and believe the company is in the right hands to materially improve its standing relative to peers,” according to the letter.
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