Hedge fund Third Point acquires majority stake in oil giant Shell: WSJ

• The hedge fund asked Shell to split into two companies to retain and attract investors

• Third Point’s stake in the oil giant amounts to more than $500 million making it one of the largest investors in the company

Daniel Loeb’s hedge fund, Third Point has acquired a major stake in oil major Royal Dutch Shell and asked the latter to split into two companies to retain and attract investors who are dropping out of businesses that aren’t environment-friendly.

Wall Street Journal reported that the activist’s stake is well over $500 million making it one of the largest investors in the company. Shell’s market value amounts to nearly $190 billion.

Shell is shedding its fossil fuel businesses due to mounting pressure from environmental groups and various governments, who are urging it to decarbonize its operations, reported Reuters.

READ MORE: Shell ordered to reduce carbon emission by 45% by 2030

In a letter, sent to its investors, which was viewed by WSJ, Third Point stated that Shell should consider creating two stand-alone companies: one with legacy businesses such as refining that would provide steady cash flow and another that houses renewables and other units requiring substantial investment.

Loeb stated that Shell’s business strategies were “incoherent” and that there was room for “improvement across the board at Shell”.

In response, as reported by WSJ, Shell said that it “regularly reviews and evaluates the company’s strategy” and welcomes an open dialogue with all shareholders, including Third Point.

Shell's reported $5.53 billion in adjusted earnings in its 2Q results. The majority of wealth came from oil and natural gas, $1.3 billion from refining, trading, and marketing, and $670 million from chemicals. The oil giant is due to report its 3Q earnings on Thursday.

READ MORE: Shell reports higher earnings; launches $2 billion buyback program

Activist investor scrutiny on big oil majors has increased this year. Earlier this year, activist investing firm Engine No.1, won three seats on the board of oil giant Exxon Mobil.

READ MORE: Engine No.1 scores a hat-trick with a third board seat at ExxonMobil

This story was first reported by Wall Street Journal.