Elliott Bets Both Ways: Inside The Hedge Fund's £850m Short Against Shell

Elliott Investment Management has made headlines once again—this time by revealing a short position worth approximately £850 million against Shell, the largest publicly disclosed wager against the oil giant in nearly a decade. But far from being a direct attack on Shell, the move is part of a more nuanced, sector-wide strategy. As the hedge fund ramps up pressure on BP, where it holds a significant long position, the short on Shell appears to be a defensive hedge—one designed not to bring down Shell, but to shield Elliott’s larger bet on its rival.

Elliott’s Position in Shell: A Big Number, but Not the Whole Story

According to filings with the UK’s Financial Conduct Authority (FCA), Elliott holds a 0.5% short position in Shell, valued at around £850 million. That makes it the biggest declared short against the FTSE 100 oil major since 2016, when Davidson Kempner targeted Shell during its integration of BG Group. The size of the position has naturally drawn attention, especially given Shell’s status as a bellwether of Europe’s energy sector.

But context is critical. The short has not been accompanied by activist rhetoric, governance critiques, or public demands aimed at Shell. There’s no indication that Elliott is positioning for a campaign against the company. Instead, the move seems designed to offset risk elsewhere in the sector—namely, Elliott’s growing exposure to BP.

Elliott’s Stake in BP: The Activist Long

On the other side of this equation sits BP. Elliott has built a nearly 5% stake in the company, worth more than £3.5 billion, and is actively pressing for strategic changes. The hedge fund is pushing BP to cut costs, focus more aggressively on shareholder returns, and narrow the gap between its energy transition rhetoric and operational execution.

This kind of activist campaign is Elliott’s signature. Known for its aggressive but disciplined approach, the fund has previously taken on large corporates across multiple sectors—from AT&T to GlaxoSmithKline. At BP, it sees an undervalued asset with a clear route to improved performance—assuming management is willing to be pushed.

But activist campaigns, even well-targeted ones, come with risk. In this case, BP is a company tied to the broader fate of the energy sector. If oil prices fall, or if investors sour on fossil fuels en masse, BP’s shares are likely to suffer—regardless of any improvements Elliott manages to extract.

The Hedging Logic: Why Shell?

That’s where the Shell short fits in. By shorting other large-cap energy companies—Shell, TotalEnergies, and Repsol—Elliott is insulating its BP position from sector-wide movements. If oil prices drop or global energy stocks face a correction, the short positions will generate gains that can offset losses in BP. In essence, the hedge fund is isolating what it sees as BP-specific upside from the general volatility of the oil and gas industry.

Importantly, there is no sign that the Shell short is based on negative views of Shell’s management or strategy. This is not an activist campaign in disguise—it’s balance-sheet risk management. For Elliott, shorting Shell is less about Shell’s future and more about BP’s.

Implications for Shell and the Market

For Shell, the optics are unfortunate but not fatal. A high-profile short might raise eyebrows among investors, but unless it’s paired with a broader activist move or followed by a wave of negative sentiment, it’s unlikely to spark lasting damage. Unlike Davidson Kempner’s 2016 short, which came amid integration challenges, Elliott’s position isn’t accompanied by doubts about Shell’s fundamentals.

More broadly, the move highlights how sophisticated hedge funds navigate sectoral risk. Instead of taking directional bets in isolation, Elliott is executing a barbell strategy—going long where it sees value, and short where it sees exposure. The Shell short isn’t a contrarian bet; it’s insurance.

Still, the size of the position could inject volatility into Shell’s trading, especially if other funds decide to follow suit. Large shorts can sometimes be self-reinforcing, triggering declines that aren’t grounded in company-specific developments.

Conclusion

Elliott’s £850 million short position against Shell may look like an attack, but it’s actually the defensive side of a much larger play. As the hedge fund leans into its activist role at BP, it is using short positions in Shell and other peers as a hedge—a way to back one supermajor while bracing for whatever the energy sector throws back.

It’s a reminder that in the world of hedge funds, pressure and protection often go hand in hand. Shell, in this case, isn’t the target—it’s the buffer.

Author: Brett Hurll