At the end an analyst asked how much more drilling acres they expected to lease/acquire. GE said about 250,000 acres and the stock tanked. He put a limit on their growth at 250,000 acres (or possibly "more acres". Also, he said that MHR has the ability to change the exercise price of the warrants, and repeated that he intends to get them registered. Clearly, the warrants are part of GE's funding plan. He again mentioned getting the various preferred issues called or converted. It is all part of streamlining the capital structure, a good thing.
Soros buys into the story of the stock, rides up, and then gets out fast. He also is an expert at hedging, and MHR has both warrants and converts to hedge against. His position is testimony that there is money to be made, but not by "buy and hold". Never go to sleep if you're investing on the basis of Soros having a position.
There are 282 open calls and 13,031 open puts at 42.50 for Feb. Those short the puts have a big reason to keep the price above 42.50 until Febs expire on Friday.
I believe these are cash warrants - meaning you tell your broker to send in the warrants you own as well as the requisite cash. In return, you get shares.
Other warrants can be cashless. You send in the warrants, the company absorbs some of the warrants in lieu of a cash payment, and issues you a proportional amount of shares based on a conversion ratio (which can be quite complex). MHR wants cash, however.
I don't think MHR will wait long to call the D. My sense from listening to conference calls is that GE wants to get a streamlined balance sheet so that he can move on drilling opportunities without past financing moves hanging around to haunt the bottom line.
The press release on the warrants says MHR can redeem them at any time. That usually means that the company offers the warrant holders a penny per warrant, or even less. Then it becomes worth the warrant holders' time to send in the cash and take the shares (assuming the warrants are in the money). I suspect GE would like to force the warrants when the holders can make an instant profit if they desire to exercise and sell shares, as that keeps shareholders happy. MHR will need to register them however, as there are State laws that would make the warrants illegal to convert if they are unregistered. So I expect MHR to wait on registering the warrants, but to proceed on taking in the D.
I don't remember the warrant terms, but aren't we in territory where MHR can force conversion of the warrants to shares? GE previously mentioned forcing the warrants and calling the Pfd. D shares. So MHR would collect cash for the warrants and get rid of some expensive Pfd. - a better balance sheet just as the wells start to ramp up.
One of the Tortoise funds filed today that it has reduced its shares from above 5% to 2.9% of EPB. If we assume that other funds are also taking an exit following the glum prospects for a distribution raise in the next couple years, then that's an explanation of the selling. Some funds don't want to wait.
'Item 8.01. Other Events.
Dividend Increase and “Stub Period” Dividend
As previously disclosed, the Board authorized an increase to its annualized dividend from $0.94 per share to $1.00 per share, contingent upon and effective with the closing of the Merger (the “Dividend Increase”). Accordingly, on February 14, 2014, the Company will pay a distribution of $0.08333 per share to stockholders of record at the close of business on February 7, 2014, including former Cole stockholders who received the Stock Consideration. Further, pursuant to the Merger Agreement, the Company and Cole each paid a “stub period” dividend to their respective stockholders who were record holders on February 6, 2014 for the period since their most recent record date through the last business day prior to the closing of the Merger. The amount of such “stub period” dividend paid by the Company was $0.08113 per share."
I expect to see the stub period dividend in my account tonight after the computers update.
Think of it as similar to the GM bankruptcy. Bondholders got stuffed and the UAW emerged with stock in a debt-free, going concern. Remember that GM common shareholders got stuffed, too. Think of the UAW as the subsidiary that gets the good stuff. Everybody else gets stuffed. It all depends on the loophole getting changed so bondholders end up in line for the crumbs.
Bondholders aren't in control. There is a loophole in Mexican bankruptcy law that allows a company to load assets into a subsidiary and then declare bankruptcy on the stripped shell that is the obligor of the bonds. If the new bankruptcy law addresses the loophole, the bonds will soar. If not, the subsidiary will emerge with the assets and bondholders will be wiped out. HMX is not subject to US bankruptcy law. Mexico is in charge here.
The E's are converts and won't cost cash to get rid of. GE said when Eagle Ford was sold to PVR that the D's were on his radar for redemption in March, 2014. He also has said he is determined to get the warrants into exercise territory. It is all coming together per his various statements.
The CEO wants the warrants to exercise to get the cash. The price is now up in range for a warrant exercise, and the cash can be put to redeem the Pfd-D stock in March. Then the capital structure improves, and the stock is worth more. The great buy here is the Pfd. D, which has .66 in dividends in it prior to redemption, and redeems at $50. There will be announcements to keep the stock up enough for the warrant exercise to take place.
I finally found the reg. statement: "Holders of shares of the Series F Preferred Stock are entitled to receive, when, as, and if authorized by the Board of Directors and
declared by the Corporation, out of funds of the Corporation legally available for the payment of dividends, cumulative cash dividends at the rate
of 6.70% of the Liquidation Preference (as defined below) per annum per share (equivalent to an annual rate of $1.675 per share). Dividends on the
Series F Preferred Stock shall accrue daily, shall accrue and be cumulative from January 3, 2014 (the “Original Issue Date”) and shall be payable
monthly in arrears on the 15th day of each month (each a “Dividend Payment Date”) commencing February 15, 2014; provided that if any Dividend
Payment Date is not a Business Day (as defined below), then the dividend which would otherwise have been payable on such Dividend Payment
Date may be paid on the next succeeding Business Day with the same force and effect as if paid on such Dividend Payment Date and no interest or
additional dividends or other sum shall accrue on the amount so payable for the period from and after such Dividend Payment Date to such next
succeeding Business Day.