Greenlight’s Einhorn Ups Stake In Civeo; Doesn’t Like What He ‘C’s

Last week, we wrote about the nosedive in Civeo (CVEO) shares following lousy guidance and the announcement that the company would redomicile in Canada as a C corp instead of pursuing REIT status. Although the logic seemed reasonable, the decision was somewhat surprising as the REIT conversion seemed to be viewed as a big value driver by large, activist shareholders such as David Einhorn’s Greenlight Capital and Barry Rosenstein’s Jana Partners.

So, perhaps less surprising, is that at least one of the fund managers is unhappy with the decision. Living up to its activist moniker, Greenlight Capital filed a 13D last week after upping its Civeo stake to 9.99%. What? You thought they would just sit around quietly and accept management’s choice? Apparently, the fund has been in talks with the company following the announcement and has a few ‘suggestions’ for management to mull over:

  • the Issuer should take on leverage to make its capital structure more appropriate for a real estate company;
  • the Issuer should implement an aggressive program of returning capital to shareholders through a well-communicated dividend policy; and
  • the Issuer should replace the CEO, Bradley Dodson, who the Reporting Persons believe has lost the support and confidence of the Issuer’s shareholders.

I guess we now know who was the driver behind the decision – it’s truly amazing how quickly one can lose shareholder ‘support and confidence’.

Shareholders reacted quite positively to the news, at least temporarily, as CVEO shares jumped over 10% after hours. They have since given back most of those gains though. I expect we will hear more from Mr. Einhorn on this situation and Jana Partners, Civeo’s largest shareholder, has yet to publicly weigh in on the subject. Overall though, shareholders should benefit when the discussion centers on what is best for shareholder return.

Disclosure: Author holds shares of CVEO.