BP shares are a notable gainer on the FTSE 100 this morning, adding 6.30% as news that Elliott Investment Management, a leading activist investor, has acquired a stake in the company.
Since the start of this year, BP's share price has quietly gone about gaining 14.2%, but looking back over a longer time horizon and there is a theme of underperformance. The past 12 months remain red, with a ~4% decline, and the previous 5 years' increase is a mild 0.78%. In contrast, one of the company's peers in industry and index Shell has seen it's share price (LON: SHEL) gain 36.67% over the past five years, and 5.37% over the past 12 months.
CEO Murray Auchincloss, who assumed the permanent position in January 2024, is anticipated to shift BP's focus back to its core oil and gas operations while de-emphasizing its renewable energy pursuits. Elliott Investment Management is expected to advocate for similar strategic realignments, pushing BP to capitalize on traditional energy, boost cash flow through cost reductions, and expedite asset divestments.
BP has already taken steps to streamline its business by planning to spin off its offshore wind operations into a joint venture and working on selling onshore wind assets. Moreover, the company aims to expand its electric vehicle charging infrastructure, targeting over 100,000 chargers globally by 2030. However, BP's ability to maintain its share buyback activities may be hampered by current market weaknesses and a strained balance sheet.
Investing in BP shares has provided some solidity as far as dividends, however activists such as Elliott look for companies that they feel are underperforming. The scale of the investment, and plans for any move here are as yet unclear, but we can expect to gain further insights in the days and weeks ahead.
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