Icahn supersizes stake in Southwest Gas after ending proxy battle

Activist investor Carl Icahn doubled his stake in Southwest Gas Holdings Inc. since the end of the first quarter following a settlement with the Las Vegas-based gas distributor, and other institutional investors snapped up shares of the company amid M&A speculation.

In a group of nine gas utility operators, Southwest Gas saw the fifth-largest net inflows from institutional investors during the second quarter, according to an S&P Global Market Intelligence review of SEC filings. Southwest Gas shares surged in the quarter as the company considered a sale of its entire business and ended a proxy battle with Icahn.

Institutional ownership in the stock increased by a net of more than 900,000 shares, compared with a net increase of 7.1 million shares in the prior quarter. Icahn Capital LP was the biggest purchaser, increasing its stake by 2.2 million shares to 5.1 million shares and becoming Southwest Gas' third-biggest shareholder as of June 30. An Aug. 15 filing showed that Icahn has increased his stake to 5.8 million shares.

Infrastructure and real estate-focused asset manager Brookfield Asset Management Inc. built its largest-ever stake in Southwest Gas.

The stock remained the second-best year-to-date performer in the group of nine gas utility operators, despite plunging 10.9% after the company ended a strategic review of its core gas utility business Aug. 3.

Net buying dries up for top, bottom stock performers

The utility group's top stock performer so far in 2022, even with a slight pullback in the second quarter, was South Jersey Industries Inc. Its stock price remained nearly 30% higher in 2022 following the February announcement of its acquisition by Infrastructure Investment Fund, expected to close in the fourth quarter. The company had little net change in aggregate institutional ownership in the second quarter.

Macquarie Investment Management Business Trust continued to wind down its position in South Jersey Industries, leading the second-quarter selling by cashing in 2.6 million shares. Once South Jersey Industries' largest shareholder, Macquarie held just over half a percent of the outstanding shares as of June 30. South Jersey Industries' second-largest holder, State Street Global Advisors Inc., was the second-biggest seller, reversing course after splashing out on 4.4 million shares the previous quarter.

Top stockholder BlackRock Inc. led the buying of South Jersey Industries, ending the quarter with a net purchase of 2.6 million shares. Most of the other top buyers were hedge funds.

UGI Corp., the group's biggest stock laggard in 2022, was the only name that saw net outflows from institutional investors. The stock has rallied 9.1% since the second quarter but remained down 14% year-to-date. Inflationary pressures weighed on the company's earnings.

State Street, nevertheless, scooped up nearly 4 million UGI shares during the quarter, offset by selling led by fellow asset management giant Wellington Management Group LLP.

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Gas utility inflows muted in Q2

The nine-company group had moderate net institutional inflows compared with the previous quarter.

Large-cap gas utility Atmos Energy Corp. topped the list of these inflows. New Jersey Resources Corp. climbed to the number two position, and Northwest Natural Holding Co. broke out of the middle of the pack.

One Gas Inc. attracted net inflows in the second quarter after posting the group's only net outflows in the prior quarter. Net inflows into Chesapeake Utilities Corp. and Spire Inc. were roughly in line with the muted net purchases of South Jersey Industries.

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