What happened

Shares of Marathon Petroleum (NYSE:MPC) were up 23.5% in September according to data provided by S&P Global Market Intelligence. That was more than enough to erase the stock's big losses in August, and it put shares into positive territory for the year to date. Shares are still lagging the rest of the oil and gas refining and marketing sector, as measured by the S&P Oil and Gas Refining & Marketing Sub-Industry Index.

The big catalyst for the reversal in Marathon's fortunes, was, unusually, a signal from some of the company's major shareholders that they'd had enough of the underperformance. 

So what

Elliott Management Fund, which owns about 2.5% of Marathon's stock, unveiled a plan to break up Marathon on September 24. The plan consisted of a letter to the company's board of directors, together with a presentation and a website to host the effort.

Under Elliott's proposed plan, the company would make its midstream master limited partnership (MLP) MPLX (NYSE:MPLX) fully independent and would divest itself of its Speedway gas stations and other marketing infrastructure, which would become a stand-alone company as well. After these divestitures, Marathon would become a pure-play refining company. The letter called for this separation to occur "immediately." The effect on Marathon's stock was certainly immediate: It jumped 8.4% that day alone. MPLX's unit price declined on the very same day, indicating investors in the MLP weren't thrilled with the potential effects of being cut loose. 

The next day, another pair of major shareholders, Paul Foster and Jeff Stevens, who said they own about 1.7% of Marathon's shares combined, not only endorsed the plan but went a step further, calling for the removal of CEO Gary Heminger. Foster and Stevens were board members of refiner Andeavor, which was bought by Marathon in 2018, and they have publicly complained that Heminger hasn't been responsive to their suggestions. This may, of course, be resentment from former insiders who now find themselves on the outside, but Foster and Stevens add to a growing chorus of breakup proponents among major shareholders, a group that also reportedly includes hedge fund D. E. Shaw, according to CNBC's David Faber.

A man's hand holds a fuel nozzle at a gas station

Big shareholders of Marathon Petroleum want to spin off the company's retail business. Image source: Getty Images.

Now what

When big shareholders start rumbling about making big changes to a company, a wild ride for shareholders can result. Just look at what happened to DuPont and General Electric after activist investor Nelson Peltz began agitating for change at those companies.

For its part, Marathon didn't shut the door on Elliott's idea, responding in a press release:

"[Marathon] welcomes constructive input related to enhancing shareholder value. The company's Board of Directors and management team remain focused on delivering long-term value for shareholders, and will continue to take actions to achieve that objective. ... We will thoroughly evaluate Elliott's proposal and look forward to continuing our constructive engagement around these issues."

That's not a no. It's also not a "Heck yes!" Shares continued to climb after the release of the press release. The company has (unsurprisingly) declined to respond to the calls for Heminger's ouster. 

For now, talk of a breakup is just that: talk. And talk is cheap. The U.S. refining space is still facing headwinds from a slowing global economy and lower prices for refined products. Separating the underperforming refining business from the stronger MPLX and Speedway businesses could unlock shareholder value, but exactly how much value would depend on the specifics of any particular breakup proposal. This news is potentially a big deal, but it's not definite enough to change the thesis on the stock.