Friday 7 August 2020 11:44 am

Activist investor ValueAct sells entire stake in Rolls-Royce

Shares in Rolls-Royce edged lower on Friday morning after news that activist shareholder ValueAct had sold its entire stake in the firm.

The activist built up a 10 per cent stake in Rolls-Royce in 2015 after a string of profit warnings, but has now decided to exit the firm, according to the Financial Times.

Read more: Rolls-Royce reportedly mulling £1.5bn rights issue to counter aviation slump

ValueAct’s departure could not come at a worse time for Rolls-Royce as the pandemic hits the aerospace industry. The engine maker contemplates raising between £1.5bn and £2bn from shareholders to bolster its coronavirus-ravaged balance sheet.

The engineer reported cash outflows of £3bn for the first half of the financial year last month. Most of the firm’s revenue comes from airlines, which pay it for the number of hours they use its engines.

But the slump in flights due to the coronavirus outbreak meant the amount of hours for which Rolls’ engines were used in the first half slumped by half.

Current investors are pushing back against this fundraising after share hit their lowest in over 10 years this week, according to the FT. A number of investors told the newspaper they would prefer to wait until the end of the year when the firm can show it has stemmed outflows.

Shares dropped 2.21 per cent today after the report suggested that the hedge fund’s exit came after growing frustration with the company’s restructuring.

Read more: Rolls-Royce shares fall as it burns through £3bn in first half

Rolls-Royce is currently in the process of a restructuring which will see at least 9,000 jobs cut and produce a free cash inflow of at least £750m in 2022.

ValueAct reportedly started to reduce its stake in the firm after the departure of its chief operating officer Brad Singer from the board in December. In April it declared a 4.5 per cent stake, which the FT reported was later sold that month.