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SandRidge Mississippian Trust I Message Board

  • nottooeasy321 nottooeasy321 Aug 21, 2013 1:28 PM Flag

    what's the problems with this stock

    is there any body know why this stock is down every day?

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    • There are basically two things wrong with this royalty trust. First, the wells are not producing as much oil or liquids as they were projected to when the trust first came public, leading to slightly less distributions than projected (or at least lower than the targeted amount without the subordination effect). Second, the price of nat gas is down from that projected when the trust came public. Those are the fundamental reasons, but there is also a technical reason. For the last several quarters, this royalty trust and some of the others that came public around the same time are experiencing a "dividend run" in which the stock price runs up into resistance right before the distribution announcement, and then is met with selling. I suspect that hedge funds are running this up and then shorting it right after the ex-div date. Since the distributions are a large % of the share price, at the beginning of trading on the ex-date, the price is marked down by the amount of the distribution. I don't know if this causes stop-losses to be tripped or if its just continued short-selling that drives the price down. Since there is almost no possibility of any good news announcements after the dividend announcement, the short-sellers don't have to worry about someone buying up supply, and since the next dividend announcement is not for another 3 months, there is no other catalyst to offset the selling. Finally, there is a Seeking Alpha author who regularly writes about the quarterly performance of this and other royalty trusts and his articles have been mostly negative. Some may even start to anticipate his negative article (and I'm betting the computer driving high frequency trading programs pick up the "negative" slant and trigger sell programs).
      Without either an increase in nat gas selling prices or an increase in well production, this royalty trust is likely to stay in the same type of pattern.

    • We both posted almost simultaniously. Apparently we are both confused by this. I bought more yesterday and am considering buying more today.

 
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