[sambeaux]

ASTOUNDING HOW THINGS CHANGE over night
Warrior Coal:
1. Earnings Report yesterday.
2. Stock up nicely after hours.
3. After over night "thinking".. stock
[and entire coal industry] obliterated today.
And even the whole stock market.
What changed?!?
Ya think!

[WallEye87]

The volatility of this stock is frustrating. We're down over 25% in the last 2 weeks on no direct news. I know there are industry concerns which are more related to thermal coal and questionable Chinese demand for MET coal. This outfit is mining one of the richest MET coal seams in the US and has built a profitable track record. The daily trading volume seems healthy enough to avoid manipulation. Corrections are expected but not cliff falls. I don't get it... If someone has a better perspective, I would appreciate them sharing

[WallEye87]

Data reflects that approx. 25%+/- of short interests have filled during this last dip in stock price.. This offers a sign that this is the bottom or the dip may have been steeper without the fill orders.

[WallEye87]

HCC is one of the most efficient coal operations in the U.S. specializing in high quality coking coal, but this Big Board stock seems as volatile as a pink sheets play sometimes.

I keep DCAing thinking it is severely undervalued. We get some short term increases then it's always followed by another correction.

Missing the analyst's estimate by 11% shouldn't be a tuck and run event when the stock is already trading under 2x annual EPS with regular dividends declared. In past quarters, when we exceed analyst estimates, crickets...

[WallEye87]

Wow... I know that met coal demand is dropping and stock piles are growing, so I get why this stock is not trading at 7x annual EPS. But it seems substantially undervalued at present and the PPS is plummeting on very light trading volume. Most holders of this stock are institutional investors. Perplexed...

[couldbebetter]

I wish management would consider what actions they could take today
in order to help support the stock price in the future, when tax
rates might be far higher. I'd like a super clean balance sheet
so that when the company would be at the tail end of the mine expansion
they could potentially borrow at a far better rate, assuming they would
need to and then only if the rate is very attractive. For now I think the
stock stays in a trading range of $19- maybe $25?

[WallEye87]

Good analogy... One positive note... A material amount of short positions filled during this last correction which indicates some additional resistance at this price point.

[couldbebetter]

The problem here is that all Met Coal miners are increasing production
all over the world which will bring down the cost of Met Coal. What
HCC should do is carry zero debt and use excess cash to buy back shares
if and when that makes sense. Once the tax loss shield is gone and
the Democrats raise corporate taxes then borrowing money to buy back
stock "might" make sense. Should EPS in some far out year fall to
$2.00 a share it would be nice then to have a $2.00 annual dividend to
support the share price. These special dividends destroy the long-term
potential value of the stock because that money properly used today can
help to avoid problems in the future.

[WallEye87]

Really... Q2 earnings announcement exceeds the analyst estimates by 19% on record quarterly sales and we tank over 11% on healthy trading volume. Now trading under 2x annual EPS.

Energy stocks are down because of the increased non OPEC oil production, but why so much impact on a Met coal provider? I also thought the China tariffs were expected & already somewhat priced into the market.

Frustrating!

[Tower of Hanoi]

Thanks, you understood my question perfectly-

TOH

[WallEye87]

I hope I understand the question. The standard trading agreement is a seller of a short position in a stock is liable for any dividends paid to the shares shorted. In the case of a cash dividend, it is either settled from their cash position or added to their margin balance. Big fluctuations can result in the dreaded margin call.

Shorts often aren't compelled to fill on a dividend announcement, because of the customary drop in PPS following the exit of cash from the company for the payment. In this case (HCC), the special dividend announcement was part of a wave of other positive news, so I did not expect the drop in PPS to be a net wash out. But... at this juncture, it was.

Opinion only, not advice

[Tower of Hanoi]

...and stay for the record date.


MY OPINION ONLY!

[Tower of Hanoi]

Do shorts have to provide "special dividends?"

Y' get what I mean?



MY OPINION ONLY!

[Old Tymer]

Well, if one has patients, I expect the price to rise back to where to it was. This seems like a pretty good company. Ever since it debuted it has gone up up up. It's been a jagged rise, but I would just as soon see that, then have it shoot straight up. I have confidence that within a few weeks, the price will be back in the $32+ range. Then you will have your original investment back, so you can enjoy your dividend gain. Patience.

[WallEye87]

As Bobby Bowden would say, "Dagummit!" The net effect of the special dividend is in the red as of this morning.

The special dividend wasn't the only pro here.. In the last few months... regular recurring dividends declared, analyst upgrades, stock buyback, creditor expansion of the operating lines (to support growth), performance thresholds met to satisfy restrictive debt covenants, & consistent quarterly earnings. But PPS still trading at a low multiple to EPS...

Long story short.. I expected the short term net effect to exceed the dividend %

The short position on the stock has declined, but the remaining shorts seem very resilient, even after two special cash dividends.

Opinions only

[Old Tymer]

For the people who are dumping HCC right now, I hope you realize that there are 2 dividends for HCC. The first is .05. The ex-date for that is today. The second dividend is $4.42. The ex-date for that is 5-3 (tomorrow). If you sell today, you will only get your .05 dividend. If you want the $4.42 dividend, you will have to hold until tomorrow, 5-3. Everyone who is dumping today will be losing out on the $4.42 dividend!

[eastunder]

I have owned HCC for awhile. Trying to remember how the last special went down...

Regarding a special:

If you sell right away, Technically your are getting your own money back, because the PPS automatically drops down to reflect the div.

You have to wait until the stocks pps returns back up to your purchase price to see the true value return of a special dividend.

My last purchase was at 29.11, stock adjusted on the ex date, I was paid the div, I waited some time to go back even on my position, which then made the dividend worth it. Then I sold.

Had I sold right away, I would have sold the position with a 6529.00 loss because the pps adjusted down, but I would have had a 6529.00 dividend (aka getting your own money back in the form of a dividend). Are you following me?

This chart shows the adjustment in a gap form - far left side.



6.529 div Paid last time with X date of 4/12
https://www.dividendinvestor.com/dividend-history-detail/hcc/

Numbers from Nasdaq history
https://www.nasdaq.com/symbol/hcc/historical

04/12/2018 23.98 open 24.56 22.5948 22.8 close 2,057,041 x date price adjusted

04/11/2018 30.71 open 30.8 29.36 30.22 close 1,791,274 last day to buy for special

So we had a 30.22 close on the day before Ex - and a 23.98 open on the ex date when pps was adjusted to reflect div

30.22-23.98 = 6.24 difference(div adjustment with pre market activity)

Just pointing that out.

[eastunder]

Revealing in what way?

[WallEye87]

Thanks for the feedback. I agree that the writing was on the wall that a special dividend was forthcoming after the debt covenants were lifted.

I just did not think the market had already fully adjusted to a mention that the company intended to accumulate cash to pay a future special dividend up to a certain amount, contingent upon board approval. Additionally, I expected more movement with the future ex-dividend date. I thought it may bring new investors to the table & offer a window for some shorts to fill.

[Tower of Hanoi]

Check the historical stock price following these big dividends. Very revealing.

MY OPINION ONLY!

[Old Tymer]

"Not too many Joe Shmos like me hold this stock. It is mostly institutional investors"

Whether you are an institutional investor or a single investor, I am having a hard time believing anyone would sell short of a $4.42 dividend. You hardly ever find anything this huge. So who in their right mind would be selling, and why? I checked with my broker and he said he doesn't see anything negative, as far as any red flags on the company. And taking a quick look at their financials, it appears last year was a pretty good year for them:

"WARRIOR MET COAL INC. (HCC) REPORT OVERVIEW

Warrior Met Coal's Recent Financial Performance

For the three months ended December 31st, 2018 vs December 31st, 2017, Warrior Met Coal reported revenue of $360.36MM vs $239.80MM (up 50.27%) and analysts estimated basic earnings per share $7.11 vs $1.83 (up 288.52%)."

I am completely stumped! I have been scratching my head trying to figure out what is going on. Does someone know something we don't? Don't know. Just have to wait and see what happens.

Good luck!

Kirk :)

[eastunder]

Why is this not blowing up?

Maybe because the Special dividend was first mentioned March 26th and its not new information?

https://finance.yahoo.com/news/warrior-met-coal-announces-stock-201000924.html

Gap on chart (end of March) was when it was mentioned for the first time in the above PR... and the market was reactive back then.

[WallEye87]

I do not think the dividend was already priced into the market, as the stock was teetering in this same range prior to the PR.

Not too many Joe Shmos like me hold this stock. It is mostly institutional investors.

Regular cash dividends have been declared, special cash dividends have been declared twice. PPS is trending < 3x estimated annual EPS. Once this young company establishes a record of consistent earnings, this could really move. Seems bridled right now for some reason. I can't figure it out.

Thanks for the feedback

Opinion only. Not advice

[Tower of Hanoi]

I'd like to know the same thing- I think they have paid a special div before.

I really have no idea-

MY OPINION ONLY!!

does seems enticing, but yeah-why isn't it going up???!!!

DO YOUR OWN DD!!!

[WallEye87]

Wow. Special cash dividend announced of $4.41/share which is approximately 14% of the current trading price with a future ex-div date. MMs report a material short position (approx. 14% of the float)

Why is this not blowing up? If you have followers, you might want them to know.


Warrior Met Coal Announces Special Cash Dividend

6:15 pm ET April 23, 2019 (BusinessWire) Print


Warrior Met Coal,Inc. (NYSE:HCC) ("Warrior" or the "Company") today announced that its board of directors has declared a special cash dividend (the "Special Dividend") of approximately $4.41 per share of Warrior's common stock, par value $0.01 per share. The Special Dividend, totaling an aggregate payment of $230 million, will be paid on May 14, 2019, to stockholders of record as of the close of business on May 6, 2019. The Special Dividend will be funded through cash on hand.

[WallEye87]

Wow. Taking a beating here after recent analyst upgrades. Is this swing related to the change of control in the house, cheap oil and natural gas, change in Chinese demand, or something else?

[WallEye87]

Creditor expanding the operating line, analyst upgrades, rising PPS... At what point will the shorts be compelled to fill this position? Is there a future compression & run opportunity here? TD reports short interest above 16% (% of float) as of 9/28

[couldbebetter]

Looks as if a number of hedge funds who did very well here are
looking to sell their stakes and move on. The special dividends
were paid not only with strong earnings but also with debt. Why
would they do that? I guess because they can. The ultimate end
game for HCC may be a buyout by a much larger player...which
may not happen until the $1 billion in tax loss carryforwards
are used up. So, the better the earnings the more quickly
tax losses get used up, the sooner either "new" investors will
move in or an acquirer will step up. HCC looks to be a very
well run company with a limit on how much Met coal can be
produced and they cannot impact the price their coal is sold at.
As I understand it, all of HCC's coal is exported mainly to South
America and Europe,with a bit going to India. The advantage HCC
has is that their coal is the highest quality and if/when the dollars
value falls they will look like a low cost provider.

[Mactd83]

anytime bud...just want people to have the facts. after dividends the original holders are sitting on a cost basis around $8 per share...massive gains..understandably they want to lock in profit

[WallEye87]

Thanks for the clarification. I misinterpreted the prospectus. Immediate assumption was the company was the seller. Honestly, I don't have a precedent of this example on anything I have owned. I would guess this sell off after lockup expiry was the strategy of the IPO investors from the beginning. I don't think they could be unhappy with the operational performance to date. My position is the same, I still like it, but can't get all of the moving parts(this 2nd offering, high short % on a positively trending young but profitable company, the anomaly special dividend, etc.). Best of luck