Shares of Hurricane Energy PLC (LON: HUR) rallied 106.6% after Activist investor Crystal Amber called for a shareholder meeting to remove all of the company’s non-executive directors while appointing two new directors.
Investors cheered the move that would effectively give Crystal Amber complete control of Hurricane Energy’s management team, which will now be composed of four directors, including the company’s CEO and the CFO.
Hurricane has had a spectacular fall from grace given that the company was worth £1.2 billion in 2019 and is now worth a mere £14 million after factoring in today’s rally.
Relations between Hurricane’s executives and Crystal Amber have been frosty, with the investment fund claiming that it had been excluded from crucial decisions at Hurricane. At the same time, its share price continues to drop.
The communication breakdown between the two firms was made public in September last year when Crystal Amber wanted to buy some of Hurricane’s loan notes below 50 per cent of par value, a request that Hurricane’s executives ignored.
The investment fund has lamented that Hurricane’s board of directors does not own much of the company; hence, they effectively do not have skin in the game. Therefore, investors could not trust the board to make the best decisions for the company.
Research supports Crystal Amber’s assertion since history proves that companies with directors who own significant stakes tend to do much better over time than those run by executives who do not own any shares or minimal shares in the company.
The move is likely to be approved by Crystal Amber’s shareholders, given today’s reaction. Investors seemed to appreciate the move since Hurricane Energy could quickly sink into administration due to its strained financial situation.
Hurricane Energy has bonds worth £165 million and has agreed to a debt-for-equity swap that will give bondholders control of 95% of the company’s shares, wiping out existing shareholders.
The oil company’s board said it would consider the request and respond in due course.
Hurricane Energy share price.
Hurricane Energy shares surged 79.06% to trade at 1.30p, having rallied from Tuesday’s closing price of 0.726p
Should you invest in Hurricane Energy shares?
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