SHAREHOLDER'S FUTURE
It turns out shareholders got wiped out. Here is why: Under a prepac, senior debt holders will get an equity swap at shareholder expense. They become the new shareholders with a clean slate. They company continues, the executives continue, but only you pay the price. Saudi Arabia wins but doesn't because Sandridge is still really alive. Saudi is paying the price and shareholders, and the US wins.
This is a learning experience. The reasons I bailed ring so more true today. Let's review:
On 1/27/16, I wrote:
"I fear their fiduciary duty has shifted to first lien holders when I feel it should be on shareholders at this stage... ...I can't see what Prem Watsa has done, and he isn't talking. Nobody is talking, and when nobody is talking, I have to get out of the fray. My experience is that silence is shame. I want to see warriors, not shameful characters on the battleground."
REALITY UNFOLDS: And that is precisely what happened. Their fiduciary duty shifted. And the sound of silence was an exit call. Prem Watsa sold out entirely during this time period which is just now available to see. Others were driving through the rear-mirror to see his actions. He made a mistake and exited without uttering a word. Listen to silence. It's about shame.
On 2/1/16 I wrote:
" the preferred shares here are not acting like bankruptcy to me. They do keep sliding though, and they are at a buck. I'm not a perfect market theorist, so that is only a peculiarity to me. It's not a crystal ball. I don't see how the preferred could fare better in a prepack. AGAIN, the hiring of these firms doesn't automatically mean bankruptcy. It's just a risk I'm worried about and sitting on the sidelines, waiting for a definitive answer on.
MY NEW OIL STRATEGY is in SANDRIDGE'S TRUSTS. I bought 1,000 shares of PER, which is their Permian Basin Trust 1. This thing is also beaten down to UNDER $3.00 per share because of oil prices, cloudiness over reserve forecasts, and negative Sandridge PR. But unlike Sandrige as a whole, these are not shale rigs. These are vertical drillers that actually have a breakeven cost lower than Saudi Arabia's breakeven cost of $30.00 for a barrel of oil. Their royalties have plummeted, but they still pay out quarterly at a huge yield. I also believe, not certain, that a trust comes out of a bankruptcy unscathed. It's a right, unlike a shareholder. They are actually units, not shares, techinically. And a trust is a protected asset that will be transferred to a new owner in a prepack who must take on the fiduciary duties of the original contract. Again, not certain, but I'm pretty sure about that.
REALITY UNFOLDS: The preferred was indeed just a peculiarity. It is now in line with fundamentals, which are nil. I was correct on the Trust as its recent values indicates. It is protected from bankruptcy.
On 2/1/16 I wrote:
You are correct, Marina, but not in a prepackaged bankruptcy. Kirkland & Ellis would only need to prove to the courts that bankruptcy is inevitable...
...the normal common shareholders will just be stepped on unless your vested interests with the hedge funds can prevail. I will never have a clear picture of who is left in regard to the funds until April, however. And that may be too late. I don't know if Prem Watsa is even in this stock, still. All the institutional ownership data is the rearview mirror, unfortuneately. This week and next, a lot more visibility up to 12-31-16 should be clear as those reports finally become public.
SD, however, got delisted after December. That forces a lot of funds out by regulations. The hedge funds, like Fairfax, are less regulated and may be able to stay. But not sure and I don't know if Prem Watsa threw in the towel. He is the best bet and most influential character, and if he is still here, he will fight for your best interests which are aligned with his. On the other hand, I don't know if he had insurance (puts) on his position or if he hedged in some other way. He is, after all, a hedge fund. So, I just don't know. And it's all this uncertainty which has the stock priced where it is.
REALITY HITS: Prem had left the building. And this could not have been known until now. Nobody was there to protect you. You got stepped on. You had no vested interests. When there is SILENCE, listen. With rising commodity prices, and with wiggle room to spare, they may have been able to make it with severe dilution, but that would have been good for the penny-stock investors. But they chose to step on you insteads because the senior lenders are more powerful, and powerful interests were not in alignment with yours. The weak get stepped on. It didn't have to be this way, but it is.
On 2/10/16 I wrote:
Today, Chesapeake responded in the way I wanted Sandridge to respond as noted in the post I'm responding to. I said, "I have been spooked by the company's silence. They can see the negative articles, and they aren't stepping up to the Microphone to assure shareholders that they have a plan to navigate the storm."
REALITY UNFOLDS: The writing in their SILENCE was on the wall.
On 2/10/16 I wrote:
13G Filings
I like to see these filings under normal scenarios. But what you are looking at are the reports I discussed earlier that are only a window up to December 31st, 2015. Sandridge Energy was delisted after December. Many funds, and Vanguard is definitely in this criteria, are not allowed to remain in a stock that gets delisted. They would have been forced to sell...
...BTW, in regard to SD insider shares, their survival isn't on the same playing field as shareholders at this point. Sandridge will survive if a prepacked bankruptcy is in the cards. They will emerge out the other end in another form, but shareholders will not. They can get new options in a newly restructured company if there is a room for them. They are not bad operators. They have just been dealt a bad hand by Saudi Arabia. It's not like they would be fired for bad performance."
REALITY UNFOLDS: This is exactly how it played out. Insiders keep their jobs and come out unscathed. Only shareholders pay the price. Many kept using lagged reports as their windshield, and I kept saying you are driving through the rear-view mirror.
On 2-13-16 I wrote my final post:
No Credibility to InsiderFinancial
No matter what your position is, a bull or bear, never sell out your integrity. While I love what your source has to say, there is no credibility to this source.
REALITY: InsiderFinancial indeed had no credibility.
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