Gavin Lumsden, Citywire Investment Trust Insider, 21 Mar 2024:
This article was published in the Telegraph earlier today.
If shareholders have learned anything about Riverstone Energy (RSE) during its volatile 10 years, it is perhaps to take profits where you can in a fund investing on both sides of the energy transition.
But what do you do when the investment company offers to buy back your shares for 31% more than they were trading at, but for 16% less than their actual value?
That’s the dilemma urgently facing investors in the Telegraph’s 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 investors to ask for a view on the £158m ($200m) tender offer the dollar-based, North America-focused fund launched last month.
Riverstone is proposing to buy back 35.7% of its shares at £10.50, which is 31% 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 to decide whether to sell in the tender?
On the face of it, the £10.50 offer is good at a 12% premium over the current price. However, it is 16% 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 24% 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.
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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