Super-Spiked Videopods (EP65): Self Versus External Activism

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We wanted to follow up on the Special Edition episode of this week’s Close of Business Tuesday video podcast where we interviewed Mark Lashier, the CEO of Phillips 66. P66 is in the midst of a proxy battle with Elliott Advisors. I will refer everyone to that episode (here) as well as the published materials from both the company (here) and Elliott (here) for more information. At Super-Spiked, it is our self-imposed policy to not discuss individual companies and so this is not P66 dedicated episode. What we are looking to do though is discuss a few topics about how we think about corporate strategy including (1) being diversified vs a pure play, (2) when it makes sense to restructure and split apart and when it doesn’t, (3) when does external activism make sense, and (4) how to be your own internal activist.

We are in a macro environment where a lot is changing in terms of the outlook for China, the increasing maturity of U.S. shale oil, faster expected power generation and the role of different energy sources to meet that growth. Geopolitics remain front and center. We expect oil demand to grow but it’s going to be choppy. Natural gas, LNG (liquefied natural gas), and NGLs (natural gas liquids) are expected to grow much faster, but what is the right business model to participate? Will upstream companies need to start looking overseas again? And if so, who and how is the best way to do that? There are a lot of moving parts.

As companies consider potentially meaningful strategic actions, there is the risk of a disconnect between what some will think is the best course of action in the near term versus the evaluation of risk/reward opportunities in the long term. As companies take steps, some will be second-guessed and the specter of rising shareholder activism will be there.

To be clear, different analysts will have different takes on this topic and what companies should do. There is no one-size-fits-all answer to any of this stuff. It can be frustrating or perhaps annoying that luck and timing can matter a lot, but so does good governance and management. No one bats 1.000. But structural underperformance is neither sustainable nor OK either.

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⚖️Disclaimer

I certify that these are my personal, strongly held views at the time of this post. My views are my own and not attributable to any affiliation, past or present. This is not an investment newsletter and there is no financial advice explicitly or implicitly provided here. My views can and will change in the future as warranted by updated analyses and developments. Some of my comments are made in jest for entertainment purposes; I sincerely mean no offense to anyone that takes issue.

📜 Credits

* Intro & Outro music: Wolf Hoffman: Concerto for 2 Cellos in G Minor, Rv 531: I. Allegro Moderato.

* This episode of Super-Spiked Videopods was edited and produced by Veriten Productions.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit arjunmurti.substack.com