American financier David Einhorn, the activist investor who took Apple to court to try to force it to dole out its cash pile, has built up a stake in Scottish oil and gas explorer Cairn Energy.
The tycoon has become one of Edinburgh-based Cairn’s biggest investors with a holding of more than 3 per cent. Einhorn, said to be worth about $1.2 billion (£790 million), runs an $8bn hedge fund called Greenlight Capital and famously made a fortune by betting against Lehman Brothers before the investment bank’s collapse triggered a global crisis.
Last year, the Financial Services Authority fined the American for insider trading of shares in London-listed Punch Taverns. Einhorn made clear that he did not believe he had acted wrongly but said he would not appeal the £7.2m fine.
He has upped his stake in Cairn amid speculation that the driller is a takeover target because the stock market values it at less than the total of its cash and investment assets.
The firm, founded by Sir Bill Gammell in 1981, grew on the back of a major find in India, but in 2011 sold the majority of its business on the subcontinent to miner Vedanta Resources.
There is now speculation that Vedanta will use its fourth-quarter trading update this week to unveil a bid to reunite the Cairn India offshoot with its former parent through a takeover bid.
Cairn’s market value of around £1.6bn suggests that investors think the board’s ambitious plans to explore relatively uncharted waters on the Atlantic margin will fail, burning cash without making the kind of major discovery needed to justify potentially-difficult extraction.
Some investors fear the company could be “picked off” cheaply before it has chance to rebuild investor confidence in its ability to find oil.
However, analysts say a takeover offer would have to pay a substantial premium to the share price in order to succeed.
The company is planning to spend around £300m a year on exploration.
Cairn said that it welcomes interest from American investors, including Greenlight, which together now own about a quarter of the company. It sees them as long-term shareholders who are broadly supportive of management’s ambitious exploration strategy.
Although sometimes outspoken, Einhorn is not always a meddlesome investor. He dropped his court case against Apple earlier this year after the company was forced to meet some of his demands.