Takeover speculation helps share prices go up except when it doesn’t. In the case of BP, it hasn’t.
Prompted by BP’s appointment today of interim boss Murray Auchincloss as its permanent chief executive to replace Bernard Looney, we’ve had a look at how recent gossip around the oil energy company failed to cushion the stock’s slide to a 28-month low.
The red bars on the price chart below mark notable press reports; click on the line intersection for full details of each.
(Apologies to readers on mobile.)
Explaining the share price weakness is easy. Brent crude’s down more than 20 per cent since September and BP’s Q3 results at the end of October heightened worries about shareholder returns amid weakening operating cashflow.
Today’s appointment of the continuity candidate as CEO (and the accompanying statement that BP will “continue our disciplined transformation to an integrated energy company”) probably kills the chance of transformative action while keeping alive the risk that share buybacks will be sacrificed to fund renewables investment, perhaps as early as Q4 results next month.
So there are lots of reasons not to hold BP shares right now. The (entirely theoretical) M&A angle might justify patience but so far it’s been exciting only to the media, where heads were turned by those UK mega-merger market rumours in early October.
What followed was a lot of journalistic flag planting and arse covering, on the off-chance that the clamour of gossip turned out to be true.
Investing and journalism have different incentives so employ different hedging strategies. Investors seek to avoid losing money; commentators just want to avoid looking uninformed. Nowhere is this mismatch clearer than around uncorroborated M&A speculation — but judging by BP’s recent price action you’re getting very good at ignoring us, which is almost certainly for the best.
Further reading
— BP should consider the mother of all mergers with Shell (Guardian, 2004, with postscript six years later)
