Aker Solutions 2020

Abstract

Aker Solutions, a Norwegian Oil Services company, was amongst many companies in this industry that saw its share price plunge in the midst of Covid-19. Meanwhile, Norwegian media had spotted the opposite trend in the so called “ESG” companies (Environment, Social, and Governance oriented companies), as these currently thrived in the stock market and were able to rapidly increase their market capitalizations. With the vast media coverage, Aker Solutions management became aware of the market trend and decided to propose a company restructuring which involved carving out their ESG assets as two separate companies, to highlight these assets to investors and utilize the market sentiment around ESG to increase equity value. This reframing was greatly perceived by investors and already within a month from the proposal, before the carveouts were even approved or enforced, the vast majority of the share price drop during Covid-19 was already recovered. For a certain high profile, billionaire investor, Kjell Inge Røkke, however, not only was he able to regain his losses, but even turn a profit. When working on this case, the objective is that the students should learn how behavioral economics concepts such as availability heuristics can lead to a narrow comprehension of the full picture. By reframing the company in the eyes of the investors, the strong recovery of the share price was, however, not only a blessing for the mainstream investor, as the final outcome was that the company´s extraordinary general meeting eventually approved to sell off their ESG assets at a price that turned out to be far below the actual market valuation. By predicting how other investors would conduct mental accounting, the dominant investor was able to utilize the opportunity to make a strong personal gain, at the expense of smaller investors.

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