One of North America’s most aggressive activist investors has set its sights on Suncor Energy Inc., seeking an overhaul of the company’s board and management team, along with the possible sale of Petro-Canada.
In a letter to Suncor’s board on Thursday, U.S.-based Elliott Investment Management expressed frustration in what it said is a recent decline in performance at the energy producer.
“It is evident that Suncor’s status quo is not working,” Elliott partner John Pike and portfolio manager Mike Tomkins wrote in their letter.
“Shareholders have seen their investment lag behind nearly all large-cap North American oil and gas companies, as Suncor’s share price has remained virtually unchanged since early 2019, even as oil prices have climbed to their highest level in almost a decade.”
Suncor, which was the most valuable Canadian energy company by market capitalization from 2000 until 2018, has been in a slump recently. Elliott’s letter points out the company’s share price has lagged that of its closest oilsands peer, Canadian Natural Resources Ltd., by 137 per cent over the last three years.
The company has also been plagued by a recent spate of operational difficulties — missing its corporate production guidance due to equipment failure and cold weather— as well as significant workplace safety concerns. Since 2014, there have been 12 workplace deaths at Suncor sites, which Elliott said is more than all of the company’s closest peers combined.
In their letter, Pike and Tomkins said all of these problems have roots in what they called Suncor’s “slow-moving, overly bureaucratic corporate culture.”
Elliot Investment Management is a well-known activist investor with approximately US$51.5 billion of assets under management. It has previously targeted large corporations such as AT&T, Hyundai, and Softbank.
It holds a 3.4 per cent economic interest including shares and cash-settled derivatives contracts in the Calgary-based company.
In its letter, Elliott laid out its proposal for Suncor, which includes adding five new independent directors to the company’s board and then undertaking a strategic review of Suncor’s executive management team, including CEO Mark Little.
It also wants Suncor to explore opportunities to “unlock the value” outside of its core oilsands business. Possibilities could include the potential sale or spinoff of Suncor’s Petro-Canada 1,800-location retail network.
Elliott will have done its research and clearly knows other Suncor investors are also unhappy, said Josh Young, chief investment officer and founder of Bison Investments, an oil and gas-focused investment firm based in Houston, TX.
Young pointed out that Suncor cut its dividend by over 50 per cent in the downturn of 2020, while Canadian Natural Resources Ltd. was able to maintain its dividend in spite the market challenges.
“Even if Elliott doesn’t own a lot of the stock, they’ve probably rightly identified that a lot of (Suncor’s) common shareholders would be interested in a change,” Young said.
More activist investment activity in oil and gas sector possible
Young said while activist investors have historically not had a lot of success targeting oil and gas companies, it’s likely that some of them are taking a fresh look at the sector right now given high oil prices and the industry’s positive market fundamentals in the near-term.
“It makes sense that activist investors are getting the all-clear from the market to refocus and go after low-hanging fruit,” he said. “And Suncor is a pretty obvious one — you have to be a big fund to target them, but it’s a pretty obvious target.”
Young added it wouldn’t be surprising to see more activist investment activity in the oil and gas sector, now that the ice has been broken.
“It seems more doable, now that Elliott’s done it,” Young said.
In their letter, Pike and Tomkins said they look forward to engaging with the board, along with their fellow shareholders, and hoped to meet with the board as soon as possible.
Suncor’s share price was up $4.74, or 11.3 per cent, to $46.90 in mid-afternoon trading Thursday on the Toronto Stock Exchange.
Elliott said it believes its proposal for Suncor could result in a share price of $60 or higher, a roughly 50 per cent increase in shareholder value.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
