Activist investor Elliott reported buys stake in British oil major BP, shares soar

The British oil major issued a trading update in January which red-flagged higher corporate costs and lower realized refining margins.

Shares of British oil major BP Inc are sharply higher in early trade in Europe, up over 7% on February 10, after activist investor Elliott Management reported purchased a significant stake, various news reports said over the weekend. The exact size of the stake purchase is not known yet, and there has been no official confirmation yet from either Elliot or BP Plc.

The development, if true, could see transformative changes at BP, as the investor looks to enhance shareholder value. Elliott reportedly believes BP is 'undervalued', and the oil major's performance has been disappointing.

Elliott Investment Management, an influential investor, has nearly $70 billion in assets. Over the years, the hedge fund has effectively initiated strategy changes and top management rejigs after buying stake in companies where it sees potential.

Over the past many years, BP Plc has faced major challenges like the Deepwater Horizon crisis and CEO Bernard Looney’s unexpected exit.

In terms of market capitalization, at around $84 billion as of February 10, BP Plc has significantly lagged its major peers Exxon Mobil, Chevron, Shell and TotalEnergies.

Shares of BP Plc are down nearly 8% over last five years while most competitors have delivered returns of at least 30% in this period. The company has been saddled with high debt and the cost of its pivot from oil and gas to greener energy investments.

The British oil major issued a trading update in January, in which it red-flagged higher corporate costs and lower realized refining margins.

Bloomberg News quoted a Jefferies International analyst, who said Elliott Investment's presence could lead to renewed focus on oil and gas, monetizing of assets, lower capital spending, and a fast-tracked divestment, aside of a demand for board and management changes.