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North American Palladium Limited ┼×irket Message Board

  • Alex1444 Alex1444 Aug 10, 2012 11:05 AM Flag

    What's with the share price?

    A new 3-year low today, after a "no bad surprises" report/CC yesterday. Down every day on high volume; this stock is absolutely despised.

    Any theories as to why, as in why now? Sure the past has been awful, but I what has happened recently that was so bad? Is there more we don't know, that only insiders know? Or are people just giving up in disgust?

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    • In retrospect, CA$2.90 doesn't mean much. The holder of the debt converts whenever holder wants. But until rates and institutional risk appetite increases, the holder will keep the 6.5% on the CA$45mil. The more important number is the 6.5%, because the 6.5% is now added to the cost per ounce of production.

      In the deal, NAP got ~CA$43million for a present value (if realized) of 14.8million shares. So the Company is borrowing 43million dollars for 14.8 million shares, or the effect of 6.5% of CA$43mil on gross revs.

      The Company has added 14.8 million shares to the mix of warrants and options and shares outstanding, thereby reducing the portion of real earnings allocated to each share.

      If I am a shareholder, my portion of earnings, which I expect to receive in the form of capital gains or retained earnings to be used in company investment, has been diminished by 8.5% for the price of 43million loonies, or ~16% of the 10Aug2012 closing price. What will the company receive on the EQUITY OF THE RETAINED EARNINGS brought about by what the company buys with 43 million dollars? And of that equity, what percentage is devoted to the 43million at present value? Is that equity going to grow more than 6.5% each year; if so, how much more?

      See, the 43 million will have enabled the equity to manifest. At least, that's what mngmt tells us.

      The shareholder gets paid based on the return on the equity.

      For the sake of argument, let's assume that a shareholder is given 43 million Canadian dollars to invest in something. The lender says, "I get 6.5% each year for five years. And 43mil is all you get because I'm not lending you any more money. I don't care if you pay me back tomorrow!" Is the shareholder able to buy something this year that will afford him, without touching the 43 million dollars ever again, a continuous flow of cash of a particular amount which will enable him to buy something later?

      Are you going to be able to buy something with the cash that this 43 million buys you that would beat something else that you could buy with the cash that this 43 million buys you? And is what you're going to buy worth giving 8 1/2% of your share of the TOTAL of that which you can buy to someone who is charging you 6.5% of one QUARTER of what it costs to build the machine that enables you to buy that which he wants an 8.5% share of?

      The CA$2.90 per share means little. Ideally NAP will have paid back the 43 million before 2017 with a return on retained earnings. If so, the lenders won't sell the shares. They might convert them but they won't sell them. They'll keep their share of the profits, thereby reducing your share.

      My bet is that the lenders believe that NAP has the ability to repay the loan with the sale of LDI alone. The debentures are convertible because the lenders believe the Pd story and the monopoly type roll which NAP plays in the Pd market. I mean, look, if LDI expansion does NOT take place, then the deficit that everybody is forecasting is no longer a forecast. Stillwater is going dry. Russia doesn't have it or can't get it, and South Africa is Africa. NAP will produce what it has, and then money will flood into the company... and then LDI EXPANSION WILL TAKE PLACE.

      Don't get me wrong, I don't know what I expect NAP to earn over the coming years. Building that expectation is difficult given no earnings and no ROE history. That's why I want the price to go down. The decision becomes easier. I become a buyer of the mine rather than of the management. I seek to be a buyer of the management AND the mine.

      If we truly are in the fourth year of an extended bull market, AND interest rates rise--thereby washing bond buyers into stocks-- then we're not even close to the highs of the industrial stock indexes or the industrial metals.

    • Numerator is bi-monthly short interest.
      Denom is 30 day MA as of the same date .

      Look at table at the right. Short interest was stable, but because of dropping volume ratio increased.

      This site seems to calculate it bi-monthly.

      I guess if you calculated it daily would change even if short interest stayed the same but since a 30 MA would smooth variations.

      All in all, 7m (about 5% of the float) is not a particularly high SI. SWC=5%. MCP=30% Some of it may be related to offering arbitrage.

      I think that some of the weakness is a realization that Q3 and Q4 earnings will be about the same +/- .01

      So when do we start looking across the valley to 2013/Q1 with LDI shaft working? Having been burned, people will IMO wait at least until 2013 PD oz guidance (in mid-Jan). Those particularly skeptical may wait until Q1 pre-lim prod report (early April).

    • Thanks. So higher volume, but not a higher short ratio. And no real way of knowing if the volume indicates more new shorting or just covering positions. At this low price, it could be either, or both.

    • Ps: I'm not saying to go in and buy PAL. But the price is in the "value" arena if someone is looking for a Pd miner.

      Comes down to management.

    • Thanks for the explanation. Just to be clear, the numerator would be July 31 short interest, and should remain the same for the next two weeks, while the denominator fluctuates with daily volume changes. Is this accurate? If so, a basically useless stat.

    • <<nterest Ratio: 7.40" in the upper right? Do you recall if that number has changed significantly? According to the Nasdaq numbers, short interest was running about 4.7 -- but I don't know if the 7.4 number is looking at the same denominator. Or maybe it's just incorrect?>>

      Short interest ratio (upper right)is short interest/(30 day average volume). So even if short interest remains same, if 30 day average volume changes short interest ratio can change.

    • Any chance of bankruptcy?

    • All I know is this (assuming the world economic system does not collapse, which it is wont to do):
      1. Catalytic converters aren't going away and older cars are wearing out at a rapid rate (I'm still running around in my '99).
      2. Palladium is far more rare than silver/gold.
      3. Also being used more in jewelry, which is a very slow market right now (consumer discretionary).
      4. Most importantly: If capturing and controlling nuclear fusion becomes a reality (and it looks increasingly as if it is), palladium, along with "heavy water", aka deuterium, is a key ingredient.
      I stopped out at $1.55 and bought back at $1.53 earlier this morning. I will double in if it drops below $1.45, and again at $1.35.
      This is the equivalent of getting silver in the low teens and gold in the mid hundreds. Ridiculous.

      • 1 Reply to kmsmith08
      • Good post thank you,

        The problem is that PAL is the subject of a short maniupulation and it is legal. Any financing of the type PAL has signed is detrimental to shareholders because the loan sharks will start to short against the box and will have NO risk doing so. The question is is it legal and if Biggar and the BoD is liable for this type of move which is obviously against shareholder's interest which is the NUMBER ONE priority for BoD.
        They should know that WE are paying them to get a decent return on investment not the opposite side.

        My concern is that I have no idea where is the bottom right now and I am buying from 1.53 to 1.48 so far...
        I thought 1.59/1.60 was a support but today it was totally anihilated. In previous posts I said that 1.45/1.50 could be a weak support?

        It will be nice to know who is shorting right now? Almost 3M shares will change hands today and on NO news? Who had millions shares to sell at MULTI YEAR low and on no news hmmmm! 3 times the average volume hmmm!

        Oh well, this market is totally crooked and the best way is to get in cash as soon as we get a decent profit.

        Good luck,

    • Hard to know what is going on? It is probably related to the financing...Financing has truly a bad effect on the pps and you can see it on the chart. The pps was cut in half from 3+ to now 1.5+ since April. This is something that should be investigated...

      I believe it is only momentarely and the pps will regain a positive momentum sooner or later to re-test 2+.

      I bought a lot at 1.53 and another at 1.52 so far today but still have an average above 1.65...

      Good luck,

    • It's simple - I bought yesterday!

      Also everything I sold on Wednesday is of course up about 8% since then.

      I should write a newsletter, just do the opposite of what I do and you'll MAKE MONEY FAST!!!

      • 2 Replies to arutad23
      • you should change your name to Roubini or Harry Dent, everytime they come out of the woodwork( June crisis looking time 2012) and say end is near, the market goes up 10-15%. don't dispair, someday the market will be for investors again. agree w previous poster who was in 2008-9 at lows and rode way up like I did, maybe it is early but long-term, this is one sweet asset. those folks driving cars for the 1st time are creating envy in the market in China and India and they will all want cars. so safe CN palladium and oil is very cheap now and for Long term worth a look. if gloomers are right and we go down 25-40%, these get cut in 1/2. sure is tempting for a ride from 1.50 to $6 again-- but 0.70 may be coming 1st. mgmt is so inept here. maybe Endeavour or Aurico or someone will take over..

      • I know your pain, I swear sometimes I'm a reverse barometer :-)

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