Investor demands sale of SilverBow Resources.

SilverBow Resources Shareholder Urges Company to Explore Sale

One of SilverBow Resources Inc’s largest shareholders, hedge fund Riposte Capital, has called on the U.S. oil and gas producer to drop its anti-takeover defenses and explore a sale. In a letter reviewed by Reuters, Riposte Capital stated that SilverBow’s valuation was being weighed down by the adoption of a poison pill to defend itself from a hostile bid through dilution. The hedge fund believes that the company could be worth between $34 and $36 per share, based on comparisons to peers. SilverBow shares closed on Tuesday at $26.63, giving the company a market capitalization of about $600 million.

“The current strategy determined by the board of directors and management has siloed SilverBow and backed the company into a corner,” Riposte said in the letter.

Riposte accused SilverBow of adopting the poison pill to deter potential suitors willing to pay a good price. The letter did not identify who those suitors might be. Run by Khaled Beydoun, Riposte said in the letter it holds a 7.5% stake in SilverBow, which would make it the company’s fourth-largest shareholder.

Rare Example of Shareholder Activism from Riposte Capital

The letter is a rare example of shareholder activism from Riposte, although it is not the first time it has publicly voiced its displeasure at a company whose shares it owns. In 2018, it challenged Canadian cannabis producer HEXO Corp, and in 2020, it challenged German high-tech manufacturer PVA TePla.

Riposte also called on SilverBow to prioritize shareholder returns over spending on new drilling. It said this can be achieved by changing the structure of management compensation, which currently incentivizes increased oil and gas production, and laying down a rig to save cash.

• New York-based Riposte believes that SilverBow should prioritize shareholder returns over spending on new drilling.
• The hedge fund called for a change in the structure of management compensation to incentivize increased shareholder returns.
• Riposte also suggested laying down a rig to save cash.

SilverBow did not respond to a comment request.