A London-based hedge fund has slammed the London Stock Exchange in a letter to the oil and gas services company Wood Group in an attempt to unlock value at the company.
As first reported by Mark Kleinman, Sky News’ City Editor, Sparta Capital Management, a top ten shareholder in Wood Group, has written to the company to suggest it explore a sale or US listing to unlock value.
In the letter, which City A.M. has also seen, Sparta said it has been a shareholder in Wood since “early 2022,” and during that time, the fund has been “frustrated by the continued underperformance of the shares.”
While the fund commended Wood Group’s actions to drive operational improvements, it noted the value of the business is now close to an all-time low.
“In the context of this,” the letter continued, “the board must be realistic on how it can best achieve fair value for shareholders.”
Sparta noted recent successful attempts by other companies to unlock value by moving their listing venue and added: “If the UK public markets are unwilling or unable to engage in Wood’s story, we believe you should undertake a strategic review and actively seek alternative solutions.”
In a scathing attack on the London Stock Exchange, the hedge fund’s letter went on to note that the exchange is currently suffering from a “UK mid-cap curse” whereby UK mid-caps have severely underperformed despite improving underlying performance.
It added: “Whatever the reasons for this market-wide underperformance, as a transformation story with history of poor execution, you are a “show-me” story and, as such, will feel the full effect of this apparent indifference from public markets.
You have given the UK public markets 17 months to recognise the value creation possible in a 36 month turn-around plan. The disconnect between intrinsic value and the value assigned by the market has never been wider
Sparta’s letter to Wood
“We urge you to be realistic that these dynamics will not shift anytime soon when assessing how best to serve shareholders in the near term.”
The fund firmly laid the reason for the Wood Group’s underperformance at the doors of the UK market, not the company’s operation performance.
The letter summarised: “You have given the UK public markets 17 months to recognise the value creation possible in a 36 month turn-around plan. The disconnect between intrinsic value and the value assigned by the market has never been wider.
“We believe that it is time to recognise that the next chapter of Wood Group’s journey could be best supported by different owners, and we urge you to undertake a strategic review and explore the best way to maximise shareholder value, including a sale of the company.”