Market Overview

Activist Investor ValueAct Offloads Entire Stake In Rolls-Royce: FT

Activist Investor ValueAct Offloads Entire Stake In Rolls-Royce: FT

Activist investor ValueAct Capital is shedding its entire stake in Rolls-Royce Holdings plc (OTC: RYCEY), Financial Times reported late Thursday. 

What Happened: The California-based hedge fund, the largest stakeholder in the United Kingdom-based airplane engine company, reportedly sold its 10% stake after issuing multiple profit warnings. 

Rolls-Royce is looking to raise $1.9 billion to $2.6 billion from shareholders to boost its balance sheet, which has suffered the brunt of the COVID-19 pandemic, Financial Times noted. The U.K. aviation firm is also reportedly looking to sell its Spanish subsidiary ITP Aero to raise funds.

Why It Matters: The overall loss incurred by ValueAct from its investment in the aviation firm is around 20%, a person familiar with the matter told Financial Times. 

The stake shedding reportedly began after Brad Singer, CEO of the hedge fund, left Rolls-Royce’s board in December.

The aviation company said it has plans to cut 9,000 jobs by the summer next year and hopes to save $1.7 billion annually. 

Rival aircraft engine maker GE Electric Company’s (NYSE: GE) has also cut its Jet-engine division by 25% due to the impact of the pandemic which resulted in 13,000 lost jobs. 

Rolls Royce's investors are urging it to deliver on costs cutting before it can undertake a rights issue by the end of summer as share prices are at a historic low, Financial Times noted.

Price Action: Roll-Royce OTC shares closed 1.75% lower at $3.38 on Thursday. 

Photo courtesy: Rolls-Royce plc on Flickr.


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