Gavin Lumsden, Daily Telegraph, 20 March 2024:
If shareholders have learned anything during a volatile 10 years about Riverstone Energy, a fund investing on both sides of the energy transition, it is to take profits when you can.
But what do you do when the investment company offers to buy back your shares for 31pc more than they were trading at, but for 16pc less than their actual value?
That’s the dilemma urgently facing investors in this Questor recommendation that floated at £10 a share in 2013 and peaked at £13.51 four years later before crashing to 160p in the 2020 pandemic.
The shares have recovered impressively since then, prompting readers to ask for our view on the £158m ($200m) tender offer the dollar-based, North America-focused fund launched last month.
Riverstone is proposing to buy back 35.7pc of its shares at £10.50, which is 31pc more than the 800p share price on 7 February before the company said it would return to shareholders the profit made on the $1.8bn sale of Canadian shale oil group Hammerhead last November..
So what do investors do now given they only have until 6pm on Monday 25 March to decide whether to sell in the tender?
On the face of it the £10.50 offer is good at a 10pc premium over the current price. However, it is 16pc less than Riverstone’s net asset value (NAV) per share of £12.53 at 31 December. This means investors who sell are giving up a huge potential gain if the shares ever close their 31pc gap to NAV.
It also means a “material” transfer of value from exiting investors to those who remain, according to James Carthew, head of research at QuotedData, an investment companies’ specialist.
Mr Carthew said if the tender offer is taken up in full, Riverstone’s NAV will rise by 113p to £13.66 a share because of the boost from buying its shares cheaply. “Shareholders need to weigh up their need for liquidity against this loss of potential long-term value – and this is very much an individual decision,” he said.
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