Activist investor Selwood Asset Management is urging German energy company RWE AG to clear up any uncertainty surrounding its potential share buyback programme as its stock continues to underperform its industry peers, according to a report by Bloomberg.
The report quotes Karim Moussalem, Selwood’s chief investment officer for equities, as writing in a letter dated 9 October that: “Earlier this year, the lack of clarity on this issue fuelled false hope and speculation among investors. If there is no real intention to pursue a buyback, I strongly urge management to either rule it out completely or, at the very least, privately explain to shareholders the reasoning behind the decision.”
RWE’s stock has dropped around 23% this year, significantly lagging behind a 3.7% gain in the Stoxx 600 Utilities Index. Several investors have been calling for a share buyback, increasing pressure on RWE to respond to shareholder demands.
Since sending the letter, Selwood has received positive feedback from some of RWE’s largest shareholders, Moussalem told Bloomberg News on Monday.
Last month, RWE’s CEO Markus Krebber hinted that the company might consider share buybacks, according to a note from Jefferies Financial Group. However, RWE later clarified that no buyback is planned “at the present time” and that the company is focused on its organic investment strategy.
Moussalem did not disclose the size of Selwood’s position in RWE but confirmed it is the hedge fund’s largest holding. He noted that a share buyback “would make sense” but warned that such a move could face political pushback, especially as RWE is expected to benefit from billions in government subsidies for Germany’s hydrogen rollout.
In addition to clearer communication on buybacks, Selwood urged RWE to establish a transparent communication strategy to reduce investor confusion and set clear limits on mergers and acquisitions, particularly in overseas markets like the US.
