A Shell gas station on May 03, 2024 in Austin, Texas.
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U.S. activist investor Elliott Investment Management has taken a short position against British oil major Shell as part of a global hedging program.
The move, which was first reported by British newspaper The Times on Thursday, comes shortly after it emerged Paul Singer’s hedge fund had taken a near 5% stake in Shell’s struggling rival, BP.
Elliott is said to have amassed an £850 million ($1.1 billion) bet against Shell, The Times reported, citing filings with the Financial Conduct Authority.
The position is reportedly worth 0.5% of Shell’s stock and is thought to represent the biggest short position disclosed against the energy major in nearly a decade. A short position refers to a bet that a company’s stock will fall in value.
Elliott and Shell both declined to comment when contacted by CNBC on Friday.
Shares of Shell traded 0.5% lower at around 11 a.m. London time (7 a.m. E.T.) on Friday. The London-listed stock is up around 13.6% year-to-date.
Earlier this month, it was reported that Elliott had taken a short position of around 670 million euros ($722 million) in French oil giant TotalEnergies. A spokesperson for TotalEnergies did not immediately respond to a request for comment on Friday.
“When a hedge fund creates a long position — leveraged or not, because often they use leverage with these positions — they need for risk management purposes to create an opposite position, i.e. a short, into a similar company,” Maurizio Carulli, energy and materials analyst at Quilter Cheviot, said on Friday.
“The most likely reason for that is because it is an offsetting position with respect to the BP one, so both Total and Shell has been created as a short for risk management,” Carulli told CNBC via video call.
“Otherwise, if for any reason the market moves against them — for example, things like oil prices or whatever — they need to have some protection,” he added.
Elliott’s moves come as European energy majors double down on fossil fuels in an effort to boost near-term shareholder returns.
Shell recently announced plans to increase shareholder returns and cut spending as it reinforces its liquified natural gas (LNG) push. BP and Norway’s Equinor, meanwhile, have also outlined respective plans to slash renewable spending in favor of oil and gas.