SSE (SSE) £16.14

Gain to date: 4.4%

Original entry point: Buy at £15.46, 3 June 2021

Activist investor EllioTt Advisors has broken cover after building a stake in utility company SSE (SSE) and written to the chairman, urging the company to renew investor confidence following an extended period of poor shareholder returns.

Elliott believes SSE missed a trick to unlock £5 billion of value via a listing of its renewables business which it claimed could have also contributed to the firm’s £12.5 billion funding plans and established SSE as a leader in renewables.

The activist appears to have a good point given the apparent healthy investor appetite for renewable assets, while raising equity is arguably a sensible way to finance long-term investments.

SSE instead plans to sell 25% of its transmission and distribution businesses to support the accelerated investment in renewables, which Elliott said lacked ambition.

In its defence, SSE argues that spinning off the renewables business would result in a loss of scale and diversity while incurring unnecessary costs.

The activist has criticised SSE’s corporate governance framework and is urging the company to appoint two new independent directors with renewables experience.

Despite the criticism, the activist believes SSE’s shares could be worth £21.

SHARES SAYS: Appearance of an activist should keep management focused on delivering shareholder value. SSE remains a ‘buy’.

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