Fortescue Ltd (ASX: FMG) shares are in the spotlight following news founder Andrew 'Twiggy' Forrest has been named in a lawsuit filed by US energy giant ExxonMobil.
Whilst the news, released yesterday afternoon, wasn't price-sensitive, Fortescue shares finished nearly 2% higher on the day at $17.57 apiece.
However, zooming out, they are down more than 37% in the past year. Let's take a closer look.
Image source: Getty Images
What's behind the lawsuit
According to media reports, ExxonMobil started proceedings against several environmental groups in a Texas Court on Monday, alleging defamatory comments were made about its recycling process.
Exxon accuses the Intergenerational Environment Justice Fund (IEJF) of defamation and claims the charity is tied to Forrest's philanthropic foundation, Minderoo. Note that Forrest is not being sued personally, nor are he or Minderoo defendants.
Forrest denies the claims.
The lawsuit alleges that Forrest worked with US environmental groups to disrupt Exxon's advanced plastic recycling initiatives, describing the actions as deliberate "smear campaigns," as The Australian reported.
Meanwhile, according to reporting by the Australian Financial Review, Exxon says the charities were turning "the wheels of American justice to self-interested purposes".
It is also a case about the corrupting influence of foreign money in the American legal system and about the sordid for-profit incentives and outright greed that tries to hide behind so-called public impact litigation.
Low-carbon energy a focus for Fortescue shares
The lawsuit also claims Fortescue is aiming to gain an edge in the highly competitive low-carbon energy market, where both goliaths are innovating heavily.
It alleges that Forrest attempted to pressure plastic resin manufacturers into agreeing to an illegal price levy. As reported by The Nightly:
Undeterred, Forrest continued to promote his campaign to other industry participants, culminating in another meeting among plastic resin manufacturers and major retail brands.
At this meeting, ExxonMobil representatives again explained why Forrest's scheme was unlawful, and those present refused to participate in Minderoo's plan. Undeterred, Forrest publicly launched this campaign at a United Nations sponsored TED Talk in New York in September 2019.
Forrest responded to the claims, stating that the fossil fuel industry was "desperate" to maintain its influence. Per the AFR:
I am personally delighted Exxon has walked themselves into the court and opened themselves up to cross-examination.
The fossil fuel industry is getting increasingly desperate at maintaining its toxic grip on society. My conflict is that I am dedicated to steering the world away from a future reliant on fossil fuels.
Could this impact Fortescue shares?
It's essential to state that Forrest – not Fortescue – has been named in the lawsuit, even though he remains the iron ore giant's largest shareholder, having founded the company all those years ago.
More importantly, none of these external factors are likely to have any material impact on Fortescue's business fundamentals.
It will continue mining and selling iron ore tomorrow, just as it always has done.
Fortescue has also firmly rejected ExxonMobil's claims and will defend them in the proceedings.
Moreover, Fortescue shares also continue to be influenced by fluctuations in iron ore prices, which remain a critical revenue driver. Any negative sentiment arising from the lawsuit could amplify these pressures.
Foolish takeout
Fortescue shares continue to be at the mercy of iron ore pricing, which is depressed compared to 2024 levels. We also can't forget the potential impacts of anticipated US trade tariffs.
Today's headlines concern the company's founder and largest shareholder but aren't expected to change anything fundamental for the company.
In the last 12 months, Fortescue shares trailed the benchmark index by more than 48%.
