Does BP need a sugar daddy? It has accumulated an impressive roster of enemies as it battles the oil leak in the Gulf of Mexico, but it is not dead yet. Nor is the company without friends. Its share price has rebounded by almost a third since the end of June. Its market value is now £75bn. It will probably announce another huge increase in quarterly profits later this month. That is not normally the profile of a company in terminal distress.
So it is hard to understand the notion that BP must take on a core investor such as a sovereign wealth fund to provide fresh equity and/or protect it from a hostile raider. This would aim at a problem that does not exist, while running roughshod over existing investors. BP does not need to dilute investors' holdings by raising new equity, and has no need of protection. ExxonMobil is the only realistic candidate to take it over. But its hands are full integrating XTO, the energy company it bought for almost $42bn – including $10bn of debt – at the end of last year.
In any case, core shareholders invited in by management to act as a buffer of any sort are a bad idea. Their interests can often trump those of other shareholders, and even of the company itself. The records of the world's many large oil companies where governments retain a large or controlling stake, are not encouraging. BP should instead concern itself with the shareholders that already own its stock. As well as sovereign wealth funds, these include the likes of the South Yorkshire Pensions Authority and the Teacher Retirement System of Texas. As it nears the critical goal of plugging the Macondo well, BP should work on developing a compelling post-leak investment case that will persuade these investors – and new ones – to buy more shares. That investment case must appeal to all investors equally.