Why Equinor Stock Went Down on Monday

Oil and gas companies may be having a long tail boom these days, but you wouldn’t know it from the latest action in Equinor (EQNR -3.02%). The Scandinavian energy company did not fare well on Monday, falling 3% in price on news of a new acquisition. The S&P 500 the index also landed in negative territory, but not as deeply, as it fell 1%.

Investing in the wind

Equinor’s main news of the day was its deal to buy a minority stake Orsted (DNNG.Y 5.51%)the largest energy company in Denmark. Ørsted is known for being a leading green energy company, not only in its home country but throughout Europe, and is particularly strong in wind energy, a segment in which Equinor is active. Equinor acquired just under 4.2 million shares in the company, giving it a stake of almost 10% with a corresponding voting share.

Ørsted’s largest single shareholder is the Danish state.

In his press release trumpeting the deal, Equinor CEO Anders Opedal said “The exposure to the producing assets complements the portfolio of large wind development projects operated by Equinor.” In total, according to the company, its new investment has a net generation capacity of approximately 10.4 gigawatts of renewable energy. It aims to reach a gross amount of 35 gigawatts to 38 gigawatts by 2030.

A new portfolio asset worth $2.5 billion

The deal wasn’t cheap; Equinor added that its stake in Ørsted is valued at about $2.5 billion, based on the latter’s closing price last Friday. Investors may feel this is a high price to pay for a minority stake, which likely gives the buyer little influence over Ørsted’s strategy and operations.