Dan Loeb’s Third Point Fund Expands Stake in Energy Giant Shell

(Bloomberg) -- Activist investor Dan Loeb’s Third Point LLC fund increased its stake in Shell Plc, saying the oil and gas giant remains undervalued.

Third Point last year built a $750 million holding in Shell and called on the U.K. major to break off its liquefied natural gas, renewables and marketing divisions into a standalone business. The fund argued that in trying to “do it all,” the company had ended up with unhappy shareholders starved of returns.

“While Shell continues to trade at a large discount to its intrinsic value, with proper management we believe the company can simultaneously deliver shareholder returns, reliable energy and decarbonization of the global economy,” Third Point said in an investor letter dated May 6.

Shell received some respite last week as its return on average capital employed -- a measure of how effectively it’s putting investors’ money to work -- topped 10% for the first time in more than a decade. Chief Executive Officer Ben van Beurden said earlier this year that Loeb was a “smart investor” who had bought into the company when stock was cheap and was now enjoying healthy returns.

Shell announced a major corporate overhaul in November, eliminating its dual share set-up and redomiciling to the U.K. from the Netherlands. While Third Point welcomed the move, the fund said it still found Shell’s disparate range of businesses “confusing and unmanageable,” and insisted that “most” investors it had spoken to agreed the company would benefit from a different structure.

Shell declined to comment on the investor letter.

Like many of its European Big Oil peers, Shell is increasingly focusing on expanding its low-carbon operations, though for now they remain a small part of its overall business. In the first quarter of 2022, Shell’s renewables and energy-solutions division reported adjusted net income of $344 million. By contrast, its integrated-gas unit posted $4.1 billion and its upstream division, $3.5 billion.

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