Soros Offloads Penn Virginia (PVA) Call Options, Adds Swaps

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A 13D filing by Soros Fund Management reveals that George Soros’ beneficial ownership in Penn Virginia Corporation (NYSE:PVA) has fallen to 6,003,509 shares, amounting to an 8.40% stake in the oil and gas exploration company.

In late June Soros beneficially owned 6,253,509 shares, i.e. 9.53%, but this included call options on 250,000 shares of Virginia Corporation (NYSE:PVA), purchased by Soros Fund Management on June 6, 2014. These options had an expiration date of July 19, 2014 and a strike price of $17.00.

As at March 31, PVA had 65,596,359 shares outstanding according to its 10Q filing.

Soros sells 250,000 call options of Penn Virginia, adds swaps

According to the latest filing, Soros Fund Management divested the aforesaid options on July 1, 2014.

This filing also reveals that Soros’ Quantum Partners entered into cash-settled total return swap contracts with certain counterparties constituting economic exposure to 700,000 shares of common stock, or 0.98% of the shares of common stock outstanding. The swaps have reference prices ranging from $12.181 to $12.9443 and expiration dates ranging from June 23, 2015 to August 11, 2015.

Taking these swaps into account Soros has an aggregate economic exposure of 9.38% in Penn Virginia Corporation (NYSE:PVA), though beneficial ownership is 8.40% as stated above. (The swaps do not give any direct or indirect voting, investment or dispositive control on the securities referenced in the contracts).

The stake percentage is calculated based upon the 71,480,385 shares of Common Stock outstanding as of July 25, 2014 (Form 10-Q for the quarterly period ended June 30, 2014). The outstanding shares increased due to an issue of convertible preferred stock.

Soros is the largest shareholder in Penn Virginia Corporation (NYSE:PVA).

Soros embarks on activism against Penn Virginia management

In June Soros Fund Management wrote a strongly worded letter to Penn Virginia Corporation (NYSE:PVA) demanding a sale of the company because it was the “optimal means to maximize value.”

The letter also claimed that the company’s June issue of convertible preferred stock “was at a significant discount to inherent value and diluted existing equity holders by approximately 21%.”

Accusing the board of presiding over a long period of decline at Penn Virginia, the letter goes on to add: “This record of failure to create value over the long term is not a track record that justifies making dilutive transactions today in the hopes that someday in the future the enhanced scale will somehow benefit shareholders more than a sale today would.” In the letter Soros Fund Management has compared the performance of the company to that of the SIG Oil Exploration & Production (INDEXNASDAQ:EPX).

We give below a chart showing the relative performance of SIG Oil Exploration & Production (INDEXNASDAQ:EPX) and Penn Virginia Corporation (NYSE:PVA).

“Other potential owners of this asset have a lower cost of capital and better scale in the Eagle Ford Shale and are clearly its optimal owners,” said Soros Fund Management in their letter.

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