Replies to post #8917 on SandRidge Energy, Inc. (fka SDOCQ)

[AwolfmanH]

Imo, a R/S may be part of a backup plan to uplist. HFT algorithms and models easily dominate the OTC gutter.

We will have a better idea in less that 24 hrs.

[Smilin_B]

OP's please sticky this post

Do you think it would be in SDOC's best interest to do a 'reverse split' in such a fashion that these institutions could buy back in?

That's a complicated question to answer with any degree of accuracy.

First, let's understand that SandRidge Energy common shares have always traded on the NYSE where most large institutional/mutual fund/hedge fund entities participate in share ownership, accumulation and distribution.

For several years, SD (NYSE) traded in the $12's, $10's on down into the $6's



Customarily large institutional firms have charters in place that PROHIBIT them from participating in (owning, buying/selling) stocks that fall BELOW certain price parameters. Typical of many of these firms, they have a $10/share threshold followed by a $5/share threshold. This means that once the PPS falls below these price points, their charters kick in and most times they make the decision to FORCE SELL, to get these stocks off their books. The purpose of this is more "window dressing" than anything else. They simply do not want to "tarnish" their image with clients, by owning these "undesirable" stocks that have fallen from grace.

During the financial crisis, this must have been a difficult rule to follow these "restrictions", as stocks such as Bank of America fell into the $1/share range. I could go on and on with the atrocities I witnessed/traded at that time and the sheer volume that traded on a daily basis was staggering. Large funds just HAD TO HAVE overlooked their own charter rules/restrictions during this period of time. RULES are categorically meant to be broken, and when the head fund manager rings the bell and says "Screw the rules, load BAC @ $1.10 all the way to $1.40 and lock it away"

My point in all of this is to identify that "sometimes" the rules are in place to help the fund "save face" with it's clients. No one wants to be identified as "the fund that owns penny stocks".

I have no way to identify, with any degree of certainty, WHEN the charter rules of each respective firm, kicked in and they were FORCED to sell shares of SD (NYSE), but looking at the above chart, it doesn't take a rocket scientist to tell you when they felt more "comfortable" in selling shares. The answer was as soon as the sideways trending channel fell apart down through the 50 period MA back in August/September of 2014. Coincidentally that was the period of time that the PPS was trading in the $6 down to $5 area and well - - as previously explained, the area where most mid to low tier firm's charter/restrictions kick in.

So the dump began and it was fairly swift. Over a period of about 5 months, SD went from $6/share down to nearly $1



It bounced over a period of a couple of weeks for a nice double then traded sideways until it finally lost the $1 support and has been in virtual freefall ever since. It's relatively safe to say that any institutions that held the shares, were mostly OUT of their positions when the PPS lost $1 and when it tanked/gapped down from .20 to .027 and delisted to "the pinks", all bets were off concerning institutional ownership.

Enter the hedge funds...

I wont get into it, but you all know where i'm going with this. There are chop shop, high risk firms that specialize in accumulating large blocks of stocks in former institutionally held equities. They buy when all hell breaks loose and no one is there to catch the falling knife. Of course this happened on January 7th and 8th of 2016. These same institutions/hedge funds, most likely distributed (sold) their shares on the double top bounce to .15/share. They need high volume to distribute and whenever SDOC gained momentum to the upside, these firms were there to feed the demand.

It is my opinion, that most of these hedge funds have sold and other hedge funds have bought. This is why SDOC has made a U-shaped base. It's called "consolidation" and it's one of the STRONGEST chart patterns to identify a base in a stock that's in a recovery mode.

In my opinion, SDOC is in recovery mode.



No longer is it trading BELOW it's 50 period MA and it's managed to trend up over it as well as it's 8, 13 and 20 period EMA lines.

Look how beautiful this "stair stepping" pattern is on the chart above. We are making a series of higher lows, using the 8, 13 and 20 period EMA lines as regions of support. THOSE AREAS are your accumulation points, as is any substantial drop down to the 50 period MA line (presently at .06/share). If SDOC were to issue some type of UNEXPECTED news such as filing for BK or issuing a statement outside of it's Financials/Earnings that "WallStreet" see's as earth shattering, then SDOC may very well trade down to the 50 period MA.

I'm just not part of the camp that subscribes to the fact this will be the case.

As far as the company instituting a REVERSE STOCK SPLIT to make the price per share more inline to most Institutional Firm's minimum charter requirements, well - - that just isn't feasible, especially due to the fact SDOC shares are trading on the OTC PINK SHEET marketplace. They went straight to hell, bypassing the OTCBB altogether. I was actually astonished to find out they got delisted down to the $hit zone. They may as well have gone to the Grays.

Nonetheless, at this price per share, SDOC isn't really a "stock".

It's an option

Amid falling commodity prices, SandRidge's profitability completely collapsed and cash flow cratered.

At the end of Q3, they had over $3.9 BILLION dollars in debt and their assets were slightly higher than that. Due to their access to a $500,000,000 credit facility, plus an approximate $355,000,000 in cash on hand, that gave SandRidge the working capital it needed to operate.

What many fail to see, is that their very first debt maturity is in 2020 for about $1.65B

Where will the price of crude and natural gas be in 2020? Higher than where we are presently?

My thoughts are YES.

SandRidge is part of the E&P sector, and as such is among all crude-focused stocks standing to lose from falling commodity prices. Companies in the E&P sector are the worst placed, as they are able to extract less value for their products. Consequently, with oil prices collapsing to their lowest levels in years, upstream firms have seen their revenues, earnings and cash flows being hit hard. This, in turn, has unnerved investors and sent shares skidding to the penny-stock territory.

Welcome to the hell that is SandRidge Energy.

Me personally?

I'm loving it way down here.

I've been trading these types of stocks for decades and they are my specialty. Block Trade the bounces for 100 - 300% gains, then sell and re-buy back on the dips as close to the trending 8, 13 and 20 ema lines as possible for the next run.

That's all I'm doing.

If SandRidge Energy actually issues a statement that they do not "intend" on seeking Chapter 11 BK or re-organizing, and have reached agreements with it's creditors - - well, - - then it doesn't take a genius to realize SDOC is a BUY AND HOLD from that moment on.

I wont sell a single share if management issues some type of forward looking statement indicating recovery.

I hope this helps answer your question.

[lonewollf]

Do you think it would be in SDOC's best interest to do a 'reverse split' in such a fashion that these institutions could buy back in?

Smilin answered pretty well.. but a more direct answer would be:

NOT at this time.

There are yes reasons, and no reasons. Eventually, perhaps.

Right now, while oil and gas are the flavor of the year shorts, NO. While there is any threat at all of BK.. NO.
The OTC actually protects the stock (somewhat) from the largest pool of shorters, as MOST brokerages have very hefty capital reserve requirements to short low price stocks (if they allow it at all. Mine requires $2 cash reserve PER SHARE to short a sub dollar stock) This of course does not stop the big boys who can afford to naked short, but it severely limits the pool of players. If the pps is much higher, any schmuck with a few grand reserve could join the frenzy

Right now, with BK an actual threat, and oil prices generally below profitable levels, all a RS would do is give the average joe short more rope to try and hang the company with. If they RS to get the share price up, Joe short and all his lemming flavor of the short friends will simply gang up and slap it back down.

SO: until the price of oil recovers, and the debt negotiations are out of the way and in the rear view, and the company can provide a clear path forward, it is not in their best interest to RS. Once those parameters are met, then it may be something they would consider if it is still necessary.