SSE (SSE) shares powered up this week after reports that activist investor Elliott Management had secretly built up a stake in the company. The share price jumped a tenth as reports of a big new player entering the register filtered out, and the move could have a major impact for SSE investors.
Elliott could force a "shake-up" at the company, said RBC Capital Markets analyst John Musk, either through an acceleration of asset sales or "more likely a full split of the business, potentially with management change at the same time". He said either would be positive for investors.
Paul Singer's firm has not confirmed or denied its involvement, which was first revealed by investing blog Betaville.
The hedge fund has gained a reputation for buying up shares in large companies and demanding changes, though its motivation is often open to question. In July, it pressured GlaxoSmithKline (GSK) to reshuffle its board on the premise that poor management was limiting performance, although the pharmaceutical giant has stuck with chief executive Emma Walmsley and recently appointed an internal candidate to run its consumer health division.
Accelerated asset sales would not be out out of step with SSE’s current plans to divest over £2bn worth of assets to help fund a £7.5bn investment in low carbon power over the next five years, most recently seen in its sale of a 33 per cent stake in oil and gas distribution company SGN earlier this month.
While it could be positive, Elliott's (still unconfirmed) arrival could also herald a rocky time for shareholders. Hold.
Last IC View: Hold, 1,384p, 18 Nov 2020