AGL share price deflates 4% in light of new future

The 185 year-old company will remain intact, but will need to find a new way forward…

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Key points

  • The AGL Energy share price is trading 2.5% lower at $8.65 apiece
  • After giving up on plans for a demerger, the energy giant will conduct a strategic review
  • Shareholders will need to wait and see whether Mike Cannon-Brookes' Grok Ventures will gain representation on the board

The AGL Energy Limited (ASX: AGL) share price is feeling the sting of uncertainty on Monday morning.

In early morning trade, shares in the polarising energy giant are down 2.5% to $8.65. However, moments ago the AGL share price was in the red by as much as 4.6%.

The undesirable performance comes amid news AGL will no longer proceed with its plan to split the company. Further, shareholders are making sense of what the path that lies ahead may now look like.

No more demerger, but now what?

As I covered in my earlier article today, the devised demerger of AGL Energy has been the target of ridicule for months. No one has been more vocal about potential shareholder destruction than tech billionaire Mike Cannon-Brookes.

Today, it appears the substantial AGL shareholder stands victorious in his battle against the demerger proposal. Triumphantly tweeting this morning, Cannon-Brookes said: “We embrace the opportunities of decarbonisation with Aussie courage, tenacity & creativity.”

However, now the activism comes to the pointy end of the stick: what does AGL do from here? It’s a question that is especially important to shareholders as the AGL share price slips today.

Furthermore, the question holds significant weight considering the company is estimated to have forked out $160 million to date on a now canned concept.

According to the announcement, the first order of business in the post-demerger world is to conduct a strategic review. This will encompass a broad assessment of what will create long-term value for shareholders amid an increasingly environmentally conscious landscape.

Additionally, the review will do the following:

  • Leverage the analytical work carried out for the demerger proposal
  • Assess any new approaches from third parties in terms of financial transactions; and
  • Conduct further consultation with stakeholders including Grok Ventures, regulators, governments, and communities

The company added it believes the closure dates of its coal-fired power stations will continue to be accelerated.

AGL share price stumbles on board breakup

On Friday, reports flowed through financial media indicating that Cannon-Brookes’ Grok Ventures will scout out two seats at the AGL table if the demerger fell through. Well, here we are a few days later with that exact scenario.

Notably, the spots are already being made available by AGL board incumbents. Both Jacqueline Hey and Diane Smith-Gander are two non-executive directors resigning from the board. Meanwhile, chair Peter Botten and CEO Graeme Hunt are relinquishing their positions.

The AGL share price may potentially be on shaky ground until shareholders have a clearer outlook.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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