tl, if they do a pre-pack or an out of court deal, then the common and preferred will go up. If they file a conventional bankruptcy then it's pretty much guaranteed that they will zero out the common and the preferred. The system is rigged in favor of management and "new money" that comes in during the bankruptcy process.
A pre-pack (take the DEXO, SPMD merger to form DXM which I traded) is about as good as it gets. Unfortunately, I think these deadbeats are negotiating DIP financing to ensure smooth operations in bankruptcy while they clear out the preferred & common.
Shorts can play games, but market makers for the most part are just trying to make a few bucks by buying on the bid and selling on the ask. GGS was a much higher priced stock a couple of years ago. Much of the selling is probably institutions taking their losses - as they usually do when a stock goes down.
There is a difference between short term trading profits and averaging down by long term investors. Over the past year I made about 75K trading the Mill common as well as call options. I traded in and out of it completely a couple of times. I recently bought about 6K shares at an average cost of about 6.45. Using "foulger match" I would apply my prior 75K of trading profits and say I had an average cost of negative 12.50. Then when Mill declined from 6.45 to 6.20 I would gloat about what a great trade it was.
To apply years of profits from active trading is just silly. The reality is that I am down a bit on my current Mill trade. The cost basis is 6.45 as most people would calculate it based on the current trade - not -12.50 based on every past Mill common and options trade (maybe I should even count the gains from trading the preferred - LOL) I ever made.
Tag Oil did issue shares at a higher level awhile back, but have been buying some back on the open market lately. They have 60 mil in cash and no debt. They should have plenty of cash flow from the shallow wells at Cheal to finance other projects without issuing common, preferred or debt. I have them trading at an enterprise value of about 2.5X forward cash flow. Great infrastructure and drilling inventory.
Good luck tradelogic. They " should" be trying to negotiate an out of court settlement with creditors. Unfortunately you see so many companies that are eager to embrace bankruptcy. They get to cut debt, pickup a big new equity stake and even get big retention bonuses. I've become very cynical about the process. There are more incentives for them to file bankruptcy and keep control than to accept a distressed buyout deal.
P.S. You should get back into DRL and the preferred issues if you aren't back in already. The PR liquidity crisis is over with the recent $3 bil muni bond sale.
For the preferred to be at 6% - 7%, then debt (which is more senior and less risky) would have to be at about 5%. Last loan was in double digits with warrants thrown in as a sweetener. How stupid do you think people are?
If they do get final approval for barging that would be a major positive. Much more likely to generate significant EBIDTA than mag tank sales IMO. Not sure I believe it though until I see a press release that says they got approval.
Is he bashing any other microcaps? If so, might be worth checking those out as well.
For example, ICH is listed on NYSE MKT. Compare the 2 companies. NHLD has a higher market cap, better profitability, higher revenues, a higher public float and a better balance sheet. Management didn't do a very good job of explaining why a reverse split is in shareholder interests in the proxy. They should have presented it properly as intended to increase shareholder value by moving off the bulletin board.
Stock would do well is they reverse split it and moved if off the bulletin board to nasdaq small cap. In terms of revenues, profits, public float, SEC filings and balance sheet I think NHLD should be ready to step up to a real exchange. Shareholders should support a reverse split intended for that purpose.
I think you left out Mill-pd. Pref stock was around 110 mil (haven't updated my numbers from the last report). I think the WMRU wells are what's picking up the slack and hopefully some good results from RU9 and the subsequent offshore wells in 2014.
I think Mill looks ok. BPZ has been on a huge run (posted a heads up here when they hit that huge well at Alabacore). PTAXF looks insanely cheap. I am becoming a big fan of the New Zealand microcap plays (Tag Oil and East West Petroleum).
I don't disagree with you on Sword, although I think they will end up with a decent return on it with the tax credits. Subsequent wells should be cheaper. The WMRU wells look good. If memory serves me those are costing under 15 mil each currently, with expected production around 500 boepd and drilling times of 2 months. Those are nice wells WMRU may be the major driver of production growth in 2014.
Perhaps after RU9, they will drill a few more cheap, quick, high return wells closer to the platform.
If Hillary takes over where Obummer leaves off, a lot of people could be hitting the exits. Could get crowded down there.
Trust preferred issues are a hybrid issue. The bank pays interest to the trust that holds the bonds. The trust then passes through the interest as dividends to shareholders. For US tax purposes they are taxed as interest even though they are called dividends. I thought the press release was ok given the above.
The 40% number you are using is an over-simplification that may not be correct. I checked one of the presentations and they cited a range of 35% - 60%. This is complex stuff, but I would guess that parts of Sword (the failed effort part that needed to be sidetracked) got the 60% rate.
I enjoy your posts which are generally very well informed. However, in this case you threw out a very high and I believe incorrect cost estimate for Sword based on a doubly faulty calculation. The whole tax credit was not for Sword and the 40% rate estimate you used may mot be correct in this particular case.
I read the call transcript as saying that the $22 mil tax credit was for Sword and other stuff - not just Sword alone. It says "primarily" which could mean 2/3 rather than 100% as you've interpreted it.
"In addition to the cash collections, we filed a $22 million application credit primarily related to work completed on unused Sword #1 well".
The Alaska tax credits are a complex formula. Since they sidetracked Sword, the part that failed might be reimbursed at a different rate by Alaska than the part that was ultimately successful? I went through the call transcript a couple of times and couldn't recreate your calculation that they spent 55 mil on Sword. I was critical of the CFO initially, but thought he did a very credible job on the presentation.
They probably will end calendar 2014 around 10K boepd with continued success from the WMRU wells which are being cranked out every 2 months and even limited success at the Platform and other drilling. Don't hold your breath waiting for $3.