Cenovus mum on snub of shareholder

Calgary-based Cenovus Energy Inc. — which in March agreed to outlay $17.7 billion to buy out ConocoPhillips, its partner in the oilsands — held its investor conference in Toronto Tuesday.

The meeting was noteworthy for a number of reasons: the stock traded at an all-time low, not an attractive situation for investors who a couple of months back paid $16 for the same piece of paper; the CEO announced he would be stepping down at the end of October; and the firm would try and sell $4 billion to $5 billion of assets.

The other reason: Len Racioppo, a co-founder of Coerente Capital Management, an institutional money manager that owns 524,000 shares, was not invited. It has owned them for more than two years.

And that non-invite would seem not to have been a random act given the history between Racioppo and Cenovus. A couple of months back, he wrote to the regulators (the OSC, the ASC and the TMX) over the large dilution involved in the way the equity part of the ConocoPhillips acquisition was structured.

With the company issuing 22.51 per cent of its shares outstanding in a bought deal, and a further 24.97 per cent of the shares outstanding to ConocoPhillips, and with his view the two amounts being linked, Racioppo demanded a shareholder vote because more than one-quarter of the company was being sold at one time.

So, last week, when news of the investor day emerged, Racioppo asked to attend — and sent an email to that effect to the company.

Guess what? It seems that Cenovus has two lists: One that contains shareholders it regards one way and another group of shareholders on which it has a different view.

In next to no time, he and his firm were told that the event was full — though Cenovus indicated their names would be put on a waiting list and would get the nod if cancellations occurred.

Clearly, there was an obvious solution. Cenovus could have considered renting a bigger space given that there are numerous hotels and meeting rooms in downtown Toronto. In turn, Racioppo was told of the difficulties of renting space in such a busy place as Toronto and that the room was full. And in something of an insult, Racioppo was told that the conference was available as a webcast.

What irked Racioppo was that finding sufficient space was not a problem the last time Cenovus was in Toronto — an event to which he was invited. And that was last March when, according to his letter to the OSC, a select group of institutional investors were effectively made insiders and given details of the transaction ahead of the public release.

Reached Tuesday, Racioppo termed the response by Cenovus as “petty.”

“I have never heard of such a thing at the institutional level,” he noted, adding, “There’s always a bigger room that you can get in Toronto.” So with some shareholders not invited, Racioppo posits the company wanted to make it “really, really friendly and that’s all. That’s why I wasn’t invited for sure.”

When asked what the non-invite means, Racioppo, whose firm still has its ownership stake in Cenovus, said it could be part of the company’s “cultural and management problem.”

But he is not satisfied with the timing of the CEO’s departure and with the major asset sale changes announced Tuesday. “There has been some poor decisionmaking and guidance given by this board. This is the worst-performing oil stock,” he said.

No reply was received from Cenovus asking why Racioppo was not invited.