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Yep, bitcoin has a history of 80-90% declines after big moves up.
No, no frustration, no tone. It's perfectly acceptable for two people to look at the same thing in different ways. I have no problem with it. Good exchange of views, just different.
Ha, Ernie. Yeah I think old man Wiggins retired a few years ago and now his kid has taken over and is even worse. The grandfather, the guy who originally started the place, he was the guy who knew what he was doing and honest as the day is long. But I agree, it's been sad to watch the downfall of Wiggins Industries. Ha
This will be my last comment on this because now the discussion seems even more illogical and self-contradictory to me. You're free to believe as you like.
I assume only one thing about Icahn -- that he wants to make money. (I don't think he cares what anybody thinks about him.) He will make more money over time if the warrants don't get exercised.
A company only becomes more attractive as a hostile takeover if the cash in the treasury is increasing without an accompanying increase in the share count. If you increase the share count all you've done is increase the total price of the company an acquirer has to pay. It's like if I have a $1 million home for sale and it's not selling. I go raise $250k from my friends with my great business idea to make the house more valuable. I now raise the price of my house to $1.25 million but in the listing I tell potential buyers there is $250,000 in cash in a safe inside the house. I accomplished nothing. I haven't increased the value of the house, it's still $1 million. But I've actually decreased the pool of available buyers because now they have to come up with $1.25m rather than $1m. If anything, I've made it less likely that someone will buy my home. On the other hand, if I had taken the $250k and added on significantly to the house or made some improvements, I might actually be able to raise the value of the home and now maybe I can sell for $1.5m rather than $1m.
With an operating company, when you raise money it becomes either dilutive or accretive based on what you do with the money. If a company raises money and just leaves it sitting in a bank account earning less than 1% interest, they will have diluted shareholders -- and over time it compounds. If they have a use for that money and can put it to work earning more per share than they are currently earning, then it's accretive -- a good thing -- and over time it compounds.
Warrants getting exercised are the equivalent of doing a stock offering.
Take a completely different company, let's call it Wiggins Industries. It has no warrants, it has one class of stock. Wiggins issues a press release telling shareholders that earnings have been great and cash is growing on the balance sheet and since it's more cash than they need, they are considering various ways to distribute the cash to shareholders -- dividends, special dividends, stock buybacks. Then the very next day the company puts out a press release announcing that they are doing a stock offering to raise cash. As a shareholder, I would not only be unbelievably confused, I'd be furious.
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I, nor anyone else that I can recall, is suggesting that Icahn would fight a hostile bid if one came. That's nonsense. If one comes tomorrow, great. I gave an example of this previously.
All I'm suggesting is that if a few days before expiration the stock price is near the strike price of the warrants, then it absolutely makes sense for him to push the stock price down for a couple of days to prevent the dilution from occurring. THAT would be sacrificing a few pawns to win the game (and he might even make money on that little operation.) The stock price will increase faster after that because there won't be 20% ongoing dilution. He will make more money. It could mean many tens of millions to Icahn over the coming years.
I realize that in all likelihood you will still believe differently, and that's fine.
A Yikes Chart:
$spx sentiment vs positioning pic.twitter.com/9oFh6cYCj9
— Álvaro Oviedo (@alvoviedo) June 11, 2022
Is Tanzanian Gold the same company that was started by Jim Sinclair like 20+ years ago? I think it was Tanzanian Royalty back then. If so, amazing that after all his talk, still nothing
That seems illogical to me because I know I don't look at my investments that way, and in reality I'd bet you don't either. I judge investments (or purchases of something) individually, and my net worth has nothing to do with it.
Let's say you have net worth of $5 million. You go to buy a new car. One dealer wants $35k the other will sell you the same car for $31k. Do you really say to yourself, "I'm Mr. Moneybags, $4k is small amount of my net worth, I'm not gonna worry about it."
Maybe some people do, but I know I don't, nor does anybody I know. And if the salesman made that argument to me, I'd say, "my net worth has nothing to do with it, I want the best deal".
The stock price will move up faster in the future if there isn't dilution. The year after year compounding on dilution will make a big, big difference to his investment over time. This will be in Mr. Icahn's self-interest. I assume he will act in his self interest.
His entire investment in this company is a teeny tiny amount of his net worth, so why did he make the investment in the first place? Here again, the percentage of net worth argument doesn't make sense to me.
Plus, this has been sort of tough sledding for Icahn. He's been in this since like 2017. Looking at past prices he probably paid about $100m, so he's not up hugely.
Give the documentary a look. He likes to keep score.
Yes, just recently:
$CNHC Chiang’s other shell getting tapped as lotto takers hit up L2 in hopes this follows $SAKH https://t.co/FfiainikYZ
— The Kyze 💰 (@theKyze314) June 10, 2022
Yeah and this is one of those things that really shows how little anyone really knows or how truly certain you can be of anything. If you'd asked me the probability of a fire at an LNG facility I would have guessed maybe 1/2 of 1% chance, maybe less. But it happened. And even if I had advanced notice that it was gonna happen and knew there was gonna be a three week shutdown, it wouldn't have helped me because I couldn't figure out how it might affect things. I might have guessed the gas stocks would have been down a lot more. Woulda been wrong.
Kind of along those lines, I don't think either the company or Icahn want the SD warrants to get exercised and have to increase the outstanding shares. Icahn ran an options desk when he was younger so he's very familiar with all this stuff. And he watches every penny. (The doc about him is pretty good) His kid is sharp also.
So on the final couple of days before the warrants expire, if the stock is within a few dollars of the strike price of those warrants, Icahn could by the Oct deep in-the-money Calls and then short the stock with a few massive equivalent sell orders large enough to drive the price down below the strike price of the warrants. And then exercise the options the next day to cover the short.
There's already a surprising amount of open interest in the Oct in-the-money Calls, especially when compared to Aug Calls. Could be total coincidence, no kidding.
Who knows, but it wouldn't surprise me if he's contemplating something like that.
Yep, they can often force redemption after a certain period of time above the strike price. I've never had it happen to me, but it's definitely possible
Sure thing, you're very welcome
BDCO Yeah I re-bought a little as well. Does the story here strike you as totally legit, or do you have some doubts?
Who knows, maybe the whole thing is a psyop to keep the Texas grid from suffering blackouts during a serious heatwave:
https://www.naturalgasintel.com/freeport-lng-blast-rocks-natural-gas-futures-but-cash-still-climbing-on-scorching-heat/
Yeah, as you get closer to expiration, the time value keeps going away and the warrants will trade much more on just their intrinsic value and maybe just a teeny bit of time value.
But I would say a very important thing to keep in mind when trading warrants or options is this: Don't ever count your profits until you've taken them.
All the unrealized gains can disappear on the last day or two and turn into losses. You might have a strike price of $40 and the stock is trading at $42.50. On the final day that warrant might be trading at $2.60 ($2.50 in intrinsic value and just $.10 in time value). You may have paid only $.05 for these warrants many months ago when the stock price was much lower and now they're at $2.60. You're sitting on huge gains! You might go into the final day all giddy thinking if the stock moves up $2.50 today, these warrants are gonna be worth $5! That's a 100-bagger, baby! This is awesome!
Instead, on the final day the stock starts up for a little bit and then starts heading down and is trading all over the place. It ends up closing at $39.85. The warrants are worthless. Not only did you lose all your gains on your warrants, you also lost the amount you originally paid when you bought them. You went from being hugely in the green, to total loss and red.
On options expiration days in particular, there can be huge swings during the day as big money groups try to move the stock price toward this option strike price and then back down to this strike price, etc, buying and selling options along the way. You can make or lose a lot of money very fast.
I don't think I've ever exercised a warrant, even though I've traded them a bunch. Don't think I've ever held to the absolute last day. If you plan on holding them into the very last day, I would call your broker and make sure you know all the rules about how they handle things and what YOU will have to do if you plan to exercise.
Yeah, I've seen that reported in multiple places, so I think it's accurate. A setback for sure, but hopefully not the end of the world. Yesterday kind of felt like the start of a pullback in energy. All my energy stocks were up huge yesterday morning, and these charts have just been going straight up. Even before the fire was announced, nearly all the stocks had come back down to almost no gain.
If it's truly a pullback and/or how long it will last is anybody's guess. We'll see. Half the battle is acknowledging to oneself that no one knows the future and there are no certainties. Everyone tries to assess risk and probability in real time, and that's the best you can do.
I'll take a stab at answering this also. Might help others as well. Except I'm gonna change "when" to "if" because there's still no guarantee the warrants get there. Question was:
"As for the SD warrants if they hit strike price and SD keeps moving higher, will the warrants gain $1 for every dollar SD moves over the strike price?"
The answer is they would probably move slightly less than dollar for dollar until the time value is eliminated.
The time value for all warrants (or options for that matter) erodes in two ways: either as the expiration date approaches, or as the warrants move deep into the money. (Or both.) The expiration date makes total sense to most of us, but the moving deep into the money is not as intuitive to understand. The reason the time value goes away here is because you have to put up a much larger amount for just the intrinsic value of the warrant.
The price you pay for a warrant (or an option) is made up of two parts: the intrinsic value and the time value. The intrinsic value refers to how far in-the-money the warrant is. So if your warrant is out of the money, you're paying solely for time value, there is no intrinsic value. If your warrant has a strike price of $20 and the price of the stock is currently $21, the warrant has an intrinsic value of $1. Barring some trading glitch or serious illiquidity, a warrant will always trade for at least its intrinsic value. But someone may also be willing to pay some time value for the remaining time before expiration, so the warrant itself may trade at a price of, say, $2.20. But if the stock price now goes to $22, the warrant price might go to $3.10 rather than $3.20 (so it went up by $.90 rather than $1 that the stock increased). The time value continues to get eliminated the further in-the-money you go, and the price you pay is mainly intrinsic value. Let's say you had a longer-dated warrant, and rather than just being a few dollars in the money, let's say your strike price is still $20, but the stock price over time has now moved up to $60. The warrant would almost never trade for much over $40. Why? Because that's a lot of money to put up and you could be doing other things with that money. You're nearly paying the entire stock price at that point. So it sort of switches from factoring in the time value of a warrant, to factoring in the time value of your own money that you have to put up.
While it might seem odd to buy deep-in-the-money warrants because they're expensive, they can actually make sense because you essentially get some free leverage. No borrowing costs, and no chance of a margin call. If you're interested in buying a stock, it always makes sense to look to see if there are any deep in the money warrants, because they often have very little time value priced into them and thus you're getting free leverage.
As an example, one I currently own is the warrant on Occidental Petroleum. Nothing special about OXY stock in particular that I like, just exposure to a bull market in energy. The warrant expires in Aug 2027 and has a strike price of $22. The stock is currently around $69, but the warrant trades at around $47 (give or take a few pennies). Add $22 to $47 and you get $69. So that's 5 years of free leverage and the warrants are incredibly liquid and have almost no bid/ask spread. Plus, no worrying about an expiration date in just a few months. As an added bonus, if the stock price collapsed horribly and started to come down near the $22 strike price, some time value would start to be priced back into the warrants. So they give dollar for dollar to the upside, and slightly less than dollar for dollar to the downside in a huge collapse. Every little advantage helps.
So anyway, hope that explanation helps rather than confuses (and assuming I didn't make any typos).
Hadn't thought of this as a possibility. You never know what can come up. Hopefully nothing serious:
Looks like gas is retreating on news of an explosion at Freeport LNG #natgas #ongt https://t.co/XNxnzeZy4B
— Nicholas Hillman (@nhillman_energy) June 8, 2022
Yep, that seems good for sure.
I hold a bunch of energy and the steepness of the rise on these charts is a little concerning. Re SD, maybe we rush to $50 in two days, who knows. But I'd guess more likely we're gonna have a pullback at some point. I'd think that getting to the strike prices on the warrants before expiration is gonna be pretty darn close, even if nothing crazy happens.
Sort of like in a neck and neck horse race, the bodies of the two horses can be exactly tied, but the winning horse's neck is surging forward while the other is pulling back. If we're really gonna make a run for the roses, I don't want SD to be in a pullback approaching the beginning of October. I don't care when a pullback starts, but I'd like to see SD start coming out of a pullback around the middle to end of August, and then be surging ahead at the end of Sept and early Oct
The twitter guy is just speculating that if Pelosi is buying calls then maybe she knows that the Fed is about to change policy and start talking about lowering interest rates, and the stock market would react bullishly to that and the value of her calls would go up. He's more joking around, but who knows.
No talk of "windfall profits tax" on MSFT or AAPL however. haha. That's despite AAPL making more money than just about anybody. Why isn't iphone pricing "unfair" Why does she have no outrage over their profits and pricing or stock buybacks? Yet the energy industry got crushed in 2014, crushed by lockdown policies in 2020, tons of people left the industry, ESG nonsense is keeping new investment out, and now just as energy co's start to make some money after many of them had to go thru bankruptcy, it's all unfair, she says. Why isn't it "unfair" for families who have to struggle to pay for their iphones? Why no talk of price controls on iphones?
Conflicts of interest should not be allowed. And govt shouldn't be determining winners and losers. They should stop playing favorites to certain industries. Enough ranting. ha!
I own a little. Not quite sure what to make of their oil and gas operation yet and the real estate sales continue to trickle in. If the oil and gas continues to get better I might opt for a little more. I just find it tough to tell at this point
Along those same lines of thinking, maybe Nancy Pelosi knows there's a change in Fed policy coming. Every 82-year-old grandmother trades massive dollar amounts on call options, right? Seems totally normal:
https://twitter.com/NorthmanTrader/status/1533816840362897409
Oh yeah, that could totally be the case. Frankly, I think the way a lot of these politicians get rich is by trading on inside info -- which is illegal for us, but not for them. Total conflict of interest and of course should not be allowed. But they look to line their own pockets. They all seem to go into office as paupers and come out as multi-millionaires.
Problem is, they know what's coming and we don't. They could know they're gonna smash the prices of energy down with some crazy intervention and be loaded up on puts on futures options. Or they may already be loaded up on calls on the oil futures contract and they're not gonna allow any new drilling or anything because they want to drive the price up to get their $200 strike price calls in the money! ha. Or their $50 calls for natgas. Wouldn't surprise me.
I'd be willing to bet that at least part of the reason for govts pushing wind and solar so hard and sending govt contracts to them is that they and their buddies will somehow benefit.
I would think if any crazy policies are going to happen it would be before the elections so the Pres could look like the hero to voters and hopefully keep some more dems in congressional seats. If there is a big red wave, the changed Congress could (in theory) put a stop to a lot of the crazy policies. But I don't really trust either political party to do what's right.
Yep, I'd say that's a fair way to look at it. Things are going well and will hopefully continue. But LMB certainly turned around in a crazy way at the last minute. They seemed like a lock for their next earnings report at the time, and I still can't figure out what happened there.
And now, with an administration that has made totally insane decisions to get us into this energy crisis, it's quite possible the govt will make further knucklehead moves. Stress and excitement; anything's possible.
Heck, the company could get bought out tomorrow for $45 per share, and the buyer agrees to buy out the warrant holders too at $3 per warrant. It's possible. I don't think any of us would have a problem with that! We'd have party hats all around!
Or we might wake up tomorrow and the govt has declared under some emergency power that no business in the country can charge more than $3.75 a gallon for gasoline and natural gas price is now fixed at $5 or $6, and all sorts of unintended consequences break loose within the energy industry and the economy
The govt had no right to lock people in their homes shut down small businesses and bankrupt them. But they did it. If you look at what we've just lived thru, I would have told you that was impossible.
Then a 75% tax would be even better!
Yeah, my guess (hope?) is they wouldn't have the votes in Congress, thus it would have to be done by some sort of emergency powers -- which is how almost everything has been done for these past couple of years. Sure hope the govt doesn't pull this. Not just for the sake of our little warrants, but for the country as a whole. Would just be devastating. Even the Wall Street Journal seems to have been co-opted, suspiciously coming out with an article suggesting that price controls can be a good thing if we all just have the collective will to make them work! Oy vey. Never thought I'd read such nonsense in the WSJ
Yep, it's a great way to destroy things so you can "build back better".
Price controls - Can't believe WSJ is publishing this type of crap. I'd like to try something different: govt spending controls, and govt policy-making controls. In other words, let individuals spend their own money and make their own decisions:
https://www.wsj.com/articles/price-controls-to-fight-inflation-gets-new-fans-11654269023?mod=hp_lead_pos11
Ugh. Hadn't seen that. Sounds like they've already been talking about it for days or weeks. Sure hope they keep their nose out of it, because yeah, it certainly won't work out how they think. Usual scenario is price controls . . . lead to shortages . . . which lead to rationing. Economic nightmare.
Same nonsense they're doing with electricity. Encourage increased electricity use, while simultaneously shutting down power plants and relying on unreliable sources of energy. And all of a sudden it's like we're living in a third world country and everybody is warned to just expect power outages to be the norm.
Seems like they're all blowhards who are usually academics and/or worked in govt their whole life and have absolutely no clue about basic economics or business. Never lived in the real world. They just think they can dictate everything because they went to this or that university.
SD and Warrants
Been offline for a couple of days. The other big risk to ALL fossil fuel companies is that the govt will change the rules. Govts around the globe are completely hostile to all fossil fuels and govt policies have totally created this self-inflicted energy crisis. Will they ever admit it was their fault? Never. They will blame those greedy coal, oil and gas companies.
Between now and the midterm elections I would not be surprised to see some sort of price controls or windfall profits tax on all fossil fuel companies. Just institute it by some sort of proclamation under this-or-that emergency powers act, and then let the courts strike it down 6 months later (after the elections).
Whether it's just stupid groupthink or a coordinated effort by all these politicians selling out to the WEF who seems to be setting the agenda for re-living every failed policy of the 70's is anybody's guess. But these people don't believe in free markets, they believe the govt is the solution to all problems.
The UK has already instituted a 25% windfall profits tax on fossil fuels. More than possible that such a thing happens here. Here, to keep with their narrative, they would probably call it something like the Unjust Putin Profits Tax.
These are not normal times. Meant to include this possibility too in my previous note, but was in a hurry to get out the door. 25% of the earnings for the entire energy industry could go away with the stroke of a pen. I obviously hope such a thing doesn't happen, but I do think it's a real possibility.
SD and warrants - I get very worried any time there's talk of a "no brainer". I've had many times in the past that I thought something was a no brainer . . . and more often than not it turned out I was the one with no brains. ha
I own both SD and the WW warrants, but nothing is a no brainer.
While everything looks rosy at the moment, we have no way of knowing how much of the current natural gas price is speculation. In the next couple of months, gas could go to $6 or $13. Neither would surprise me. Putin invaded Feb 24, SD share price was a little over $12 and natgas was around $4.60. I'd have to guess that the war was at least partially responsible for the near doubling in both prices. Who knows, a lot of this may have been the equivalent of everyone running out and buying toilet paper at the beginning of the lockdowns.
The whole energy complex could turn negative in the short term. Starting to hear a lot more stories about real demand destruction. And Europe's gas storage is filling at the fastest rate on record.
Even though my guess is this is a long term bull market for energy and commodities, even if that's correct you can still have sharp draw-downs or little bear markets within longer term bull markets.
I'm not predicting it, but if Putin and Zelensky were to declare some sort of peace, oil and gas (and their stocks) might fall 10-25% overnight as a knee-jerk reaction.
An additional consideration on the warrants is that it's possible there are two major constituencies who don't want to see them get exercised: the company, and the current shareholders (of whom Icahn is the largest, and he ain't no dummy). The company will have to issue about 20% new shares if the warrants are exercised. That will dilute the earnings by 20%. The company basically already has a cash problem -- they've got too much of it and are talking about dividends or buybacks. Yes, they'll get like $290m in cash if the warrants are exercised, but unless they've got some accretive $400m acquisition they've got their eye on, what good does the cash do them? The company might have to turn right around and do a tender offer for 20% of its shares, so that was just a big waste of time and money for the company. If the share price is close to the strike price around the expiration date, maybe that would be a time to announce some bad news and the price moves a little lower.
None of this is meant to sound negative, but just to bring attention to the idea the everything has risk -- nothing is a no brainer.
LMB and its warrants seemed like a no brainer too. The only reason I didn't own them is because I was equally convinced the price was moving higher and when it got above where I felt comfortable buying it, I just stopped paying attention to it because I figured it would never come back down to my buy price again. Wrong-o! It's only in hindsight that we might all say the offering at $12 killed the rally. At the time, I think most of us viewed that offering as just the opposite: "These institutions know what they're doing. If they're buying at $12, you know they think company is worth a lot more!"
So I, for one, am not gonna get too cocky. The stock price is still a long ways away from the lowest warrant strike price of $41.34. Plus we've just had four up days in a row. That's a pretty long extension up with no pullback.
There's plenty of pluses that have already been mentioned by others and I hold a nice position. But I've found it's usually best to consider the potential downsides as well.
MICS - Wow you were up really early to catch that. congrats! I think there was odd pre-market and after-hours action in those other stocks as well, so not sure what the heck is going on with these things.
MICS - I'm wondering if there may be some new way of short selling game that has to do with companies moving from OTC to a bigger market. This is about the third one I've seen where they do an offering along with an uplist. First day of trading on the new exchange the stock is up huge for at least a portion of the day or the whole day. Then it's a big decline way beyond what seems justified, and for an extended period of time.
Look up MGLD for a somewhat similar scenario. The big up day is the day they uplisted.
I know there have been two more stocks like this, but that's the only one I can remember right now. Not sure what's going on with these.
WCRS -- For what it's worth, the SEC enforcement officer mentioned in that article appears to be this gentlemen who is now in private practice:
https://www.dechert.com/people/k/anthony-s--kelly-.html
Original SEC press release:
https://www.sec.gov/news/pressrelease/2016-100.html
Just a suggestion. Depending on how much money is at stake, might be worth the cost of an attorney letter from that Kelly guy reminding the company that they have a fiduciary duty to ALL shareholders and you are willing to negotiate a sale right now. At current prices, the company has darn near the entire share price in cash! This is just theft. CEO might be concerned that with a few phone calls from the attorney to his old buddies at the SEC, the CEO could be under criminal charges.
If I had shares, first thing I might do is just call the company and see if you can arrange a private transaction. Or maybe better yet call Blackstreet directly and see if they'd like to buy your shares and be done with it. That might be what they're trying to accomplish anyway.
Hate when companies pull this type of stuff.
WCRS - Yeah, same here. I actually don't currently own any, but have in the past. Just hate to see stuff like this. Looks like not a first time scammer:
https://www.buyoutsinsider.com/gp-buys-out-lps-waives-capital-call-obligation/
WCRS - Yeah, I'll be very leery of Blackstreet Capital out of Bethesda, MD in the future. They owned 75% of the shares here and mgt only 3%, according to last 10-K. I have a guess about who's pulling the strings. Company has almost the entire current market cap in cash.
WCRS - Ugh. Deregistering and not even planning on trading on the OTC. Intends to do annual buybacks. So basically, you can sell once a year at whatever price they offer.
Maybe a larger shareholder will fight this:
https://www.sec.gov/Archives/edgar/data/1363958/000175392622000735/g083017_8k.htm
PGNT - It's pretty funny how some companies can have 50% or 60% gross margins and can't make money, but little PGNT does just fine with 10% gross margins. ha
Seems like a lot of bloated organizations out there
PRPH In general, I like the CEO, but on this call I found him a little tough to understand on the covid testing and profitability. HRSA funding not approved yet and may not come, that's roughly half of revenue. Second and third quarter likely to be lower revenues, but did you get the impression they'll still be profitable for q2 and q3? At some points he seemed to say yes, at other points it felt like he was saying profitable for the year, but maybe not next two q's?
Sounds interesting, but looks like they haven't been close to profitable thus far. Can you provide any further insight on why you think they'll be profitable this year?