Rolls-Royce shares slip after ValueAct sells out

Rolls-Royce shares fell again on Friday after it emerged that the one-time largest investor in the troubled engineer has dumped its entire stake.

Shares fell as much as 4pc as investors digested news that the ValueAct hedge fund, which built up an 11pc stake in Rolls starting in 2015, had sold off the last of its holding.

The stock has taken a hammering from the collapse in air travel caused by coronavirus and on Monday week fell to a more than 10-year low of 212p - down 70pc compared with this time last year - before recovering ground. Shares ended at 252.6p, down 0.2pc.

In March 2019, ValueAct began trimming its stake, taking it down to about 4.5pc at the start of this year.

It is thought the hedge fund sold half of its remaining stake after Rolls's results in February that were not affected by Covid, and then disposed of the rest in the April as the scale of the pandemic’s impact on aerospace companies became clear.

ValueAct’s appearance on Rolls’s shareholder register in 2015 initially caused concern at the company.

The San Francisco-based fund started by Jeff Ubben described itself as an activist shareholder, leading Rolls’s newly installed chief executive Warren East to warn about “opportunistic” investors preying on the company.

However, relations later improved with Rolls appointing Brad Singer, one of ValueAct’s executives, to the board.

Mr Singer emphasised that ValueAct’s idea of an activist investor differed from the traditional understanding, with a greater emphasis on long-term improvement than asset fire sales.

When he stepped down in December last year after four years on the board, Rolls had embarked on several restructuring and economy drives, as well as selling its marine business.

The hedge fund is likely to have taken a significant loss on its holdings in Rolls. When it cut its stake from 9.48pc to 4.5pc in April, Rolls shares were about 350p - half the price ValueAct is thought to have paid for most of its holding.

To boost its beleaguered balance sheet, Rolls is in talks about selling its Spanish component business ITP, and other fundraising measures including a £1.5bn rights issue are understood to be under consideration.

Rolls-Royce declined to comment, while ValueAct was not able to available to comment.