Big Oil’s Winning Streak Forces Activist Investors to Regroup

Big Oil’s big climate showdown

Months of tensions between oil majors and activist investors could reach a boiling point at the annual meetings of Exxon Mobil and Chevron Wednesday, as the U.S. giants pump record levels of crude and sit on bumper profits.

Facing another defeat, the climate groups that bought shares to try to influence corporate behavior are now rethinking their strategies, Vivienne Walt reports for DealBook.

Activists’ efforts to pressure Big Oil to clean up its polluting ways are faltering. Last week, climate change protests rocked Shell’s annual meeting in London. But the company easily saw off a measure filed by Follow This, a Dutch shareholder activist group, and other investors, demanding that the oil giant drastically strengthen its climate targets.

Exxon could face an even fiercer battle this week — not only with the activist investors it is suing, but from powerful institutional investors as well. They include Norway’s huge sovereign wealth fund, and CalPERS, the California pension fund, both of which strongly oppose Exxon’s attempt to quiet some of its most vocal climate critics.

A recap: In January, Exxon sued two activist investor groups, Arjuna Capital and Follow This, in a Texas court, saying that their resolution to include so-called Scope 3 emissions targets reflected “an extreme agenda” that was detrimental to shareholders.

The groups withdrew their resolution, fearing that an Exxon legal win could essentially silence all activists and shareholder debates. Last week, a Texas judge ruled that Exxon’s lawsuit could proceed against Arjuna, which is based in Massachusetts, but said that the court had no jurisdiction over Follow This, which is based in Amsterdam. Exxon is still suing.

The activists are regrouping. They fear that Exxon’s ultimate goal is to end the established practice of shareholder activist resolutions beyond climate. Those votes also tackle executive compensation, voting rights and other corporate governance issues.

One new idea: up the pressure on Wall Street. “In general, we should focus far more on investors” than on oil majors that “just don’t want to change,” Mark van Baal, the founder of Follow This, told DealBook. He said that winning over pension funds and firms like BlackRock, Vanguard and State Street, which have significant stakes in oil companies, would give the activists more clout.

But those firms are facing a separate backlash. Many have been slammed for embracing E.S.G. investing, or prioritizing environmental, social and governance principles. According to an RBC Capital report published last week, conservative think tanks have pushed a record 83 “anti-woke/anti-E.S.G. proposals” resolutions this year.

Another complication: Van Baal said that big investment firms preferred having a private dialogue with oil companies about the climate crisis, rather than backing activist resolutions. “The oil industry has done an excellent job of convincing investors that they had to choose between climate and profits,” he said.

In other energy news: Saudi Arabia hopes to reportedly raise as much as $10 billion as soon as next month by selling shares in the oil giant Saudi Aramco. And, Irfaan Ali, Guyana’s president, told The Financial Times that he was open to Chevron drilling for oil alongside Exxon in the country’s lucrative, but disputed, reserves.

HERE’S WHAT’S HAPPENING

Closing arguments are set to begin in Donald Trump’s hush-money trial on Tuesday. The jury could begin deliberations as soon as Wednesday. Prosecutors say that the former president struck a $130,000 deal to silence the porn star Stormy Daniels in an effort to protect his 2016 presidential campaign. Elsewhere, as legal costs mount, the Trump Organization has reportedly sold one of Trump’s private jets to a Republican megadonor.

Apple shares climb on upbeat China sales report. The tech giant’s stock gained more than 2 percent in premarket trading after a Bloomberg report that iPhone shipments have rebounded in Apple’s second-biggest market in the past month. Chinese consumers have been pulling back on spending in recent months, and local brands have been eating into Apple’s market-leading position. The latest data offer hope that Apple’s China sales slump may be coming to an end.

Melinda French Gates reveals her latest giving pledge. The co-founder of the Bill & Melinda Gates Foundation announced that she would spend $1 billion to support women’s rights in the U.S. and overseas. The disclosure is the first by French Gates since she announced that she would leave the foundation she started with Bill Gates, her former husband.

Elon Musk’s artificial intelligence start-up raises billions. The tech mogul announced on his social media platform this weekend that xAI had landed $6 billion from investors including Andreessen Horowitz and Sequoia Capital, along with Saudi Arabia’s Prince Alwaleed bin Talal, valuing the company at $18 billion. Musk is playing catch-up to the likes of OpenAI, Anthropic and others who have raised huge sums in the past year to help commercialize their A.I. systems.

Adam Neumann walks away from WeWork

Adam Neumann has officially admitted defeat in his dream to buy back WeWork. DealBook is first to report that Neumann has ended his bid to acquire the co-working company that he co-founded in 2010 and built into a global enterprise valued at $47 billion valuation before it fell into bankruptcy last year.

Here’s his statement to DealBook: “For several months, we tried to work constructively with WeWork to create a strategy that would allow it to thrive. Instead, the company looks to be emerging from bankruptcy with a plan that appears unrealistic and unlikely to succeed.”

The writing was on the wall for weeks. Neumann stepped down as WeWork’s C.E.O. in 2019, after the company failed to go public amid questions about its business model and corporate governance. But in February, DealBook reported that Neumann was planning an audacious move to buy back the company.

His new real estate company, Flow, which is backed by the likes of Andreessen Horowitz, the venture capital firm, offered more than $500 million. The plan was to buy WeWork or its assets, and inject bankruptcy financing to keep it afloat.

WeWork found a different lifeline, freezing out Neumann. A U.S. bankruptcy judge last month approved a restructuring deal that essentially wiped out $4 billion in company debt. It also included $450 million in new funding from SoftBank, the Japanese tech investor that has backed WeWork from its early days, enabling it to exit Chapter 11 bankruptcy.

WeWork has been busy renegotiating leases in an effort to shed $11 billion in rent obligations. The rise of hybrid working since the early days of the coronavirus pandemic has hit the commercial real estate sector hard. A surge in vacancies has helped companies like WeWork rework deals with landlords, but it’s also casting doubts over the growth potential of the shared work space business model.

A new offer for Vista Outdoor

The bidding war over Vista Outdoor is about to enter another round. The parent company behind ammunition brands like Remington and CamelBak water bottles is set to announce Tuesday that the Czechoslovak Group, a Prague-based defense business, has raised its offer to $1.96 billion.

Vista hopes that will be enough to fend off a separate bid from MNC Capital, an investment firm associated with Mark Gottfredson.

Vista is expected to say that CSG’s new proposal is better for shareholders. CSG has added about $50 million to its offer, and Vista is also set to announce that it will return $130 million to investors on top of that following a strong fourth quarter.

How we got here: Vista agreed to sell its ammunition business to CSG for $1.9 billion, leaving Revelyst, its non-firearms division, as a stand-alone public company. In March, MNC offered $3 billion for the whole company. Last month, Vista agreed to talk to the firm but said MNC’s bid undervalued Revelyst, and it pushed for a higher offer.

Vista is now expected to reject MNC’s offer. The company is set to say that it has yet to receive a better offer or committed financing, even though it has shared confidential material with MNC after agreeing to talk to the firm.

CSG’s revised offer doesn’t resolve the national security cloud hanging over any deal. The CSG deal is under review by the Committee on Foreign Investment in the United States, the interagency body that reviews the national security implications of foreign investments in U.S. companies.

MNC isn’t subject to such a review because it’s an American company. But it highlighted those concerns in correspondence with CFIUS, saying that the CSG deal would give an overseas company control of the West’s supply of a key ingredient in ammunition. MNC has also argued that its offer assigns Revelyst $1.1 billion in enterprise value, nearly double the $570 million implied by the original CSG deal.

“We attempted to come to a reasonable resolution with them but they ceased communication midway through.”

— RansomHub, a hacking group, said Monday that it was behind a big cyberattack on Christie’s website days before the auctioneer was set to begin its spring sales. The group also claimed that it had obtained sensitive information about wealthy art collectors that it would release by the end of May.

The week ahead

Inflation data will loom large again this week. Here’s what to watch for.

Tuesday: The Conference Board releases its monthly consumer confidence index, and Cava, the restaurant chain, reports first-quarter results amid a torrid rally in its shares.

Hess shareholders are set to vote on Chevron’s $53 billion takeover of the oil company.

Wednesday: The Fed’s beige book, which details economic activity across 12 districts, is set for release. HP and Salesforce report quarterly earnings.

And it’s deadline day for BHP Group to make a formal bid to buy Anglo American, a rival mining giant.

Thursday: Dell, Dollar General and Marvell Technology release quarterly results.

Friday: Wall Street will be closely watching the publication of the Personal Consumption Expenditures report, the Fed’s preferred inflation measure. Similarly, investors will get Consumer Price Index data for the eurozone, the last big inflation report ahead of the European Central Bank’s rate-setting meeting next week.