Elliott Associates continues its activism against Hess Corp. (NYSE:HES). The hedge fund released a presentation against the company and pointed out that it needs ‘accountability’ to achieve what Elliott believes intrinsic value at $128 per share.
Paul Singer’s Elliot Associates emphasized that the stock price of Hess Corp outperformed by 18 percent and added billions to the market cap of Hess since revealing to the public its involvement in the company.
Peter Lynch was one of the best growth investors of all time. As the Magellan Fund manager at Fidelity Investments between 1977 and 1990, he averaged a 29.2% annual return. Q1 2021 hedge fund letters, conferences and more The fund manager's investment strategy was straightforward. He wanted to find growth companies and sit on them Read More
According to the hedge fund, Hess Corp. (NYSE:HES) underperformed by -460 percent due to miss management and poor capital allocation of its CEO John Hess. Elliott Associates noted that the endless restructuring of the company is ineffective and its unfocused portfolio resulted to a severe discount to the intrinsic value of the company. The hedge fund added that the energy company’s failed exploration that resulted in $4 billion losses still continues.
Furthermore, Elliott Associates emphasized that the management and board of Hess Corp. (NYSE:HES) hand pick nominees who are willing to rubber stamp status quo. The hedge fund emphasized that the board selected John Mullin III as a lead independent directors who is a joint executor of the Hess family trust. The hedge fund said, “This is yet another glaring governance concern and underscores that history repeats itself at Hess.”
Moreover, Elliott said the board of the energy company prevents changes by “constructing false excuses.”
The hedge fund pointed out that Hess Corp. (NYSE:HES) needs good directors in addition to its great assets to recoup tremendous shareholder value.
Last January, Elliott was the fourth largest independent shareholder of the energy company. The hedge fund expressed its interest to boost its 4 percent stake in Hess Corp by acquiring additional $800 million shares and proposed to nominate five directors in the company’s board to implement change to resolve its 17 years of under performance.
In addition, Elliott said that Hess Corp has a tremendous value, but it is trapped due to poor oversight by its inexperienced board of directors who lack independence to set a clear, shareholder-focused, value creating strategy.
In response, Hess Corp. (NYSE:HES) described the proposal of Elliott as seriously flawed and implanted additional restructuring and capital allocation initiatives including the divestiture of E&P assets, monetizing Bakken midstream assets, exiting downstream businesses, raising dividend to $1 per share, repurchasing $4 billion shares, and appointing six new directors.
“Hess’s announcement is incomplete and it lacks accountability—we believe significantly greater share price appreciation can be achieved. But, it requires truly independent directors that can hold management accountable and ensure they follow through,” commented Elliott regarding the restructuring plans of the energy company.