Soros Firm Eyeing Activist Campaign?

Jun 30 2014 | 6:34am ET

An old dog has learned a new trick, with hedge fund pioneer George Soros dipping his toe into shareholder activism.

Actually, it’s Soros’ 45-year-old firm, now led by his sons and by chief investment officer Scott Bessent, doing the dipping, assailing oil and gas company Penn Virginia over its poor performance over the past five years. A letter to Penn Virginia last week, signed by Bessent, accused CEO Edward Cloues of “egregious” choices and a series of “investor relations disasters.”

Soros Fund Management, which became a family office three years ago, owns nearly 10% of Penn Virginia and is its largest shareholder. The firm wants the company to explore a sale, with Bessent writing, “We believe there are numerous potential acquirers who would be interested in acquiring the company at a material premium to its current trading price, as demonstrated by any number of precedent transactions in the industry.”

Instead of putting out a for-sale sign, Bessent complained, Penn Virginia proposed a convertible preferred share issuance, diluting existing investors by more than 20%. “The timing of this transaction was particularly egregious,” Bessent noted, but “the strategic rationale was not much better,” and the move’s announcement “has destroyed shareholder value.”

“The board’s decision to grow in this dilutive manner indicates to us that it is more interested in ‘empire building’ than maximizing shareholder value,” he continued, accusing the existing board of presiding “over a long period of decline.”

“We reserve the right to take any and all actions we believe necessary to ensure that shareholder value is not further eroded,” Bessent concluded.

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