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UPDATE 1-Investors increase Exxon holdings as activists' pressure push shares higher

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·3 min read
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(Adds background on oil price, Exxon declining to comment)

By Svea Herbst-Bayliss

BOSTON, May 17 (Reuters) - A number of prominent investment managers were so convinced newcomer activist investor Engine No. 1 could successfully push for changes at Exxon Mobil Corp that they added to their holdings in the oil company in the first months of 2021, according to interviews and regulatory filings.

Fidelity Management & Research Company, which oversees nearly $5 trillion in retirement and college savings accounts, as well as hedge funds Millennium Management and Laurion Capital Management made sizable purchases during the first quarter, regulatory filings show.

Hedge fund D.E. Shaw, which was also engaging with Exxon management, also increased its holdings, the filings show.

Banking giants Bank of America Global Research and Mellon Investments also added to their holdings, the filings show.

These investors welcomed the roughly 34% gain in Exxon's share price during the first 12 weeks of 2021, after months of watching the stock slide to a low of $31.11 in late October. The company was removed from the Dow Jones Industrial Average in August as many speculated that a dividend cut was coming.

By early December Engine No. 1, a $250 million hedge fund, had invested some $40 million in Exxon and was publicly criticizing the oil major for lagging behind in its approach to lower-carbon energy and for poor returns on past fossil fuel investments. For the first time ever, climate change was playing a major role in the election of directors at a big U.S. company.

Since Engine No. 1 unveiled its campaign at Exxon, the stock price has climbed 47%. During the first quarter as the economy showed signs of recovering after the pandemic, U.S. oil prices climbed 23%. Proxy advisory firm Institutional Shareholder Services noted that both Exxon and the hedge fund have claimed credit for the stock price improvement.

Behind the scenes, D.E. Shaw, which owned roughly 5.6 million shares in Exxon at the end of the first quarter, also pushed the company to make changes. Amid its prodding, Exxon added two new board members, moves that underpinned confidence and helped push the share price higher.

D.E. Shaw raised its stake by 39% during the first quarter and Fidelity raised its stake by 20%, buying 14.6 million shares to own 85.2 million shares on March 31, the filings show.

A representative for Exxon declined to comment. The so-called 13F filings are backward looking but are closely watched for possible investment trends and hints on where activists may want to push for changes next.

Other investors cut or liquidated their holdings in Exxon during the first quarter, possibly to lock in gains at time of uncertainty over the outcome of the bitter proxy fight. Shareholders will vote on directors and a handful of other matters on May 26.

Hedge fund Adage Capital slashed its holding by nearly 50%, selling 6.3 million shares to end up with 6.5 million shares at the end of the quarter. Holocene Advisors sold all 3.7 million shares that it had owned. (Reporting by Svea Herbst-Bayliss; Editing by David Gregorio)