Recently, the largest company from Portugal, EDP wanted to delist their company EDP Renovaveis (EDPR). The company plans to give about $7.29 or 6.8 Euros per share to the shareholders that have minority shares. This amount is way less than the Initial Public Offering of the company. The Initial Public Offering of EDPR was priced at about 8 Euros or $8.6 and was released in the year of 2008.
Offering a buyback of shares at a rate less than the Initial Public Offering is outrageous when the company is in good standing. The investors should get their money worth and get the profit they deserve. This is what aggravated Ecofin to call the bid undervalued and egregiously low.
Ecofin, a London-based firm of hedge funds also has some stake in the company and they believe that this is a shitty offer. The hedge fund said that EDP’s offer to buy 22.47% stake back from the shareholders for their subsidiary EDP Renovaveis undervalues the company significantly. This was said in a letter to the board of EDPR.
The total valuation of Ecofin hedge fund is about $2 Billion and such a big hedge fund focuses on investing in sustainable sources. If a hedge fund like Ecofin suggests that the offer is not what it should be, then most probably they are right.
They added in their letter to the board of EDP Renovaveis that the offer wasn’t full and fair and it was impossible to consider that as well. The hedge fund Ecofin also urged all the shareholders to decline this offer because it was egregiously low. With this recommendation, they added that the independent directors of the company didn’t have any kind of reason to recommend such a heinous offer.
The amount of money Ecofin has invested in EDP Renovaveis is still unknown. An Ecofin spokesman, when asked about revealing the stake of the hedge fund in EDP Renovaveis, declined to comment. On the other hand, a spokesman of EDP also declined to comment on the matter and about the views Ecofin has for the directors of the company.
The renewable energy subsidiary of EDP, EDP Renovaveis is currently the fourth largest producer of electricity generated by wind. Wind energy is one of the cheapest and highly available sources of renewable energy. Being the fourth largest producer of electricity generated by wind, EDP Renovaveis is clearly doing well. Even after that, if an offer like this surfaces it’s not good for the image of the company either.