NRG Energy Responds to Activist Investor Complaints, Shares a Leap

Key takeaways

  • NRG Energy shares rose more than 3% as the electricity supplier boosted share buybacks and sought to change its board.
  • These measures were taken following criticism from activist investor Elliott Investment Management.
  • CEO Mauricio Gutierrez said the company is optimistic that the measures taken will increase cash flow and shareholder value.

Shares of NRG Energy (NRG) jumped more than 3% after the electricity supplier indicated that it would increase its share buybacks and shake up its board following the reviews from activist investor Elliott Investment Management.

The company announced it was increasing its share buybacks to $2.7 billion by 2025 from $1 billion previously. Additionally, NRG said it was working with an independent firm and obtaining shareholder feedback “to bring additional expertise to the board.”

The movements intervened a little more than a month after Elliott demanded changes after NRG bought home technology provider Vivint Smart Home for $2.8 billion in March. Elliott called it “the worst deal in the power and utility industry in the past decade.”

In a letter to the board, the company said it wanted NRG to add new independent directors, improve its operations and reliability, conduct a strategic review of its home services strategy and establish a new capital allocation framework to return to shareholders at least 80% free flow of capital. He argued that by taking these actions, NRG could create $5 billion in value for investors, driving the stock price “to or above $55 per share”. 

In his statement, the CEO of NRG Mauricio Gutierrez indicated that over the next five years, “our plan will generate excess cash that will exceed our current market capitalization and deliver significant value to our shareholders.”

Despite Thursday's gains, the NRG Energy shares were still in negative territory over the past year. “/wp-content/uploads/2023/06/799164098eb92f625c68d588046d7223.png” />

YCharts

Do you have any news tip for Investopedia reporters? Please email us at tips@investopedia.com

Source: investopedia.com

Like this post? Please share to your friends:
Leave a Reply