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A Shell logo is displayed on May 03, 2024, in Austin, Texas.
U.S. activist investor Elliott Investment Management has initiated a short position against the British oil giant Shell, expanding its global hedging strategies. This development was initially reported by The Times, revealing that Paul Singer’s hedge fund had also secured nearly a 5% stake in BP, a struggling competitor to Shell.
The reported bet against Shell amounts to £850 million (approximately $1.1 billion), with the position representing 0.5% of Shell’s outstanding shares. This short position is considered the largest disclosed against the company in nearly ten years, signifying a bearish outlook on Shell’s stock performance.
Both Elliott and Shell opted not to comment when approached by CNBC regarding this situation. As of late morning trading in London, Shell’s shares were down 0.5%, even though the company’s stock has increased about 13.6% year-to-date.
Earlier in the month, Elliott was also noted to have established a significant short position of around 670 million euros ($722 million) in TotalEnergies, another major player in the oil sector. TotalEnergies did not respond promptly to inquiries for a statement about their engagement with Elliott.
“Hedge funds often take long positions but must balance their risk by taking short positions in similar companies,” explained Maurizio Carulli, an energy and materials analyst at Quilter Cheviot. He characterized Elliott’s strategy as a protective hedge against its investments in BP, indicating that the shorts on TotalEnergies and Shell are strategic moves to mitigate risk in case of market fluctuations, such as changes in oil prices.
These maneuvers by Elliott occur amidst a broader trend where European energy companies are notably reinforcing their focus on fossil fuels to deliver immediate gains to shareholders. Shell has recently articulated its intentions to enhance shareholder returns while cutting expenses, especially as it accelerates its liquified natural gas (LNG) initiatives. Similarly, BP and Norway’s Equinor have announced efforts to reduce their renewable energy investments in favor of increasing production and profits from oil and gas operations.
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www.cnbc.com