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Walter Energy, Inc. Message Board

  • richard.schulze52 richard.schulze52 Jul 3, 2013 11:42 AM Flag

    Low stock price does not equate to bad management

    WLT is like a leaf in the wind. More subject to macroeconomic forces than management. Wlt has traded down, but the entire sector has traded down. All coal companies with all different management are not doing much better. Be honest with yourselves, you dabble in WLT because the stock moves. This stock has had a history of manipulation and wild price swings. Anyone who has built a position has done so at higher prices.
    Wlt will survive and it will have another day in the sun. Just as soon as the shorts back out.

    The high frequency traders have been very busy in this stock. I think the SEC should investigate the trading patterns and the manipulators of these shares. How can you justify trading 200 million shares in a week when there are only 64 million shares available. Furthermore, I would bet the bulk of the available shares have not been traded. That means some minor number of shares is responsible for the exchange of 200 million shares on the market. This means the same shares are being bought and sold over and over again, each pass benefiting the HFT who skim a little on each pass.

    Do you really want the volatility to stop? Or would you leave the trade if the volatility went away? Quit harping about management and focus you anger on the real problem, stock manipulation sanctioned by the SEC and profiting the HFT crowd.

    Sentiment: Buy

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    • Unfortunately in this case management has done a poor job of preparing for the worst and have left the company completely exposed to a downturn in the met coal market:. Clearly, the Western acquisition was an example of top-ticking the market and is a major factor in the precipitous price decline. A few of the many other examples:

      1) Walter Management stated in their Q2 '12 conference call when referring to Q4 benchmark for coking coal "I don't think coking coal will go below $200/mt at this point." The Q4 coking coal benchmark was $170/mt (not that anyone can predict the future of volatile coking coal prices but you must be prepared for a range of scenarios). Only in April 2013 did it finally shut its Willow Creek mine and had other unprofitable mines runnning for far too long (not to mention that it spent too much on expansionary capital expenditures burning precious liquidity).

      2) Walter could have refinanced its loan in May (Alpha Natural Resources refinanced its bank debt with a covenant-lite loan in May). Walter waited another month and by then it was too late as the debt market turned from hospitable to closed (certainly closed for 10x levered companies that were looking to do covenant-lite refinancing). Walter could have killed two birds with one stone-pushed out debt until 2019/2020 timeframe and rid itself of any covenant issues-instead both issues still remain and are an overhang for the stock.

      Investors have lost their confidence in management and management has lost credibility-that has played a major role in Walter declining 70% on a YTD basis vs. 45% for Alpha and Peabody.

    • Richard,

      "How can you justify trading 200 million shares in a week when there are only 64 million shares available."

      First and foremost, let me correct some inaccuracies in your above statement. WLT traded a total of 254 M shares in whole month of June and highest volume was in the week of June 17th (94 M shares)

      " Furthermore, I would bet the bulk of the available shares have not been traded. "

      With that being said, If it turns out that if real shares have not changed hands (At least no complete float turn over) then I would agree with the fact that all the action was by HFT taking advantage of the recent negative news. But, if it happens to be true then the same phenomenon can repeat itself on the upside as well (We saw a glimpse of it on June 18th)

      As far as the management is concerned they are not completely off the hook.

      1) Why did seek out to look for refinancing and then revoke it within 7 business days?
      2) The reason given was pretty weak, (market conditions?? More specifics would have helped or even blaming the sudden surge in bond yields... Something more substantial than a vague reason)

      Unless, the is some sort of deal in the works, the management can/should be more careful with their PR releases and how it will be perceived/interpreted. The one thing the market hates is "Uncertainty" and WLT management has given plenty of scope for that.

    • Excellent post.

      Yesterday I made the same exact points regarding HFT, the number of shares that are actually trading, the float, and the daily volume numbers.

      I think we agree that it is pretty obvious how/why this is happening.

    • "Low stock price does not equate to bad management" 100% agreed but good management will ...

      1. Defend their companies,
      2. Will not create uncertain environment where shorts thrives,
      3. Will issue timely and effective PRs,
      4. Will re-assure investors in tough market environment,
      5. Will disprove "bankruptcy" rumors,
      6. Will per-announce to scare shorts away and build convidence in investors
      7. Will not keep 100% quiet after 80% fall in PPS within 3 months!!! WLT was $40/share about 3-4 ago!!! It's $10.50 today!!!

      • 2 Replies to netexplorerone
      • They did not know the price was going to fall or how far it would fall. The management was buying shares at $70, proof they did not have a clue how far the price would fall. They also may not have purchased Western, but the Western purchase gave them strong pricing control for North America. I haven't heard Rio Tinto, BHP, SCCO, CLF, or any of the giant miners giving soothing words. Why do you expect more from Walter? I can only refer to my previous post, 200 million shares traded in a week with only 64 million available shares is not investing, it is war.

      • richard...

        If you look at the PPS decline of WLT the past few weeks to other coals, it HAS BEEN DOWN many, many times over. Netex has a point with the 80% decline and the recent 50% decline.

        There were 2 days where WLT was down 16% due to the leak on the refinanicing and due to an analyst comment on the possible suspension of the dividend. Both of these items ARE in the basket of items that management has control to handle. During this time, the shorts have piled in.....

        The short interest is published and investor relations knows of the high short interest-- Are they reacting??? Management defending their company and future would be prudent by a management team to flush the shorts.

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