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Freeport-McMoRan Inc. Message Board

sponge_bob_is_no_square 87 posts  |  Last Activity: Aug 20, 2014 3:13 PM Member since: Mar 16, 2004
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  • Reply to

    More on shorts . . .

    by sponge_bob_is_no_square Aug 20, 2014 8:12 AM
    sponge_bob_is_no_square sponge_bob_is_no_square Aug 20, 2014 3:13 PM Flag

    "The Schwab lending program paid 20% and now 18% for shares to facilitate short sells."

    I'm out of the stock now, of course. Upon emergence, I will be a shareholder again with almost all of the shares will be custodied at Schwab.

    Believe me, they and I are going to have a conversation about their lending program.

  • sponge_bob_is_no_square sponge_bob_is_no_square Aug 20, 2014 2:58 PM Flag

    "Does anyone in their right mind think that USU common equity is going to trade anywhere near the equivalent to a $500mm market cap?"

    Easy, King. Get a grip.

    With $350 million in debt (at cost) and all the preferred being converted to common stock, getting to $500 million in market cap may not be the stretch that you imagine.

    By the way, a $500 million market cap on 8 million shares implies a price per share of $62.50. That would make the compliance cops at the NYSE very happy.

    But what do I know?

  • sponge_bob_is_no_square by sponge_bob_is_no_square Aug 20, 2014 8:12 AM Flag

    "My personal experience (confirmed by other postings here) is that no brokerages allow retail investors to short USU. They all claimed they couldn't borrow the shares."

    My take is that the available USU shares have already been loaned to the institutional shorts who are paying to borrow them, with more unmet demand than the shares "available for rent." Lending desks are big profit centers for the brokers. Retail "longs" that own their shares in margin accounts are generally unaware of the money being made in this manner. Institutional longs get paid to lend shares (then the broker marks it up) but retail longs usually lend their shares unknowingly for free.

    I don't think that naked shorting is an issue with Usec. Or at least I see no evidence from my perch.

    I agree that the the short squeeze in July 2013, to the extent there was one, was also accompanied with a lot of new day-traders and program traders that contributed to the spike. That's what caused the daily trading volume to substantially exceed the float.

    The question remains, could it happen again?

  • Reply to

    Sponge

    by kingedxxxxx Aug 19, 2014 1:28 PM
    sponge_bob_is_no_square sponge_bob_is_no_square Aug 19, 2014 5:02 PM Flag

    Off the top of my head:

    1. Yes as to the share class ownership.
    2. Yes, the accrued interest should be something close to a year's worth, approaching $30 per note.
    3. Upon emergence, the market value of the new shares should trade for about 12 times the value of USU the day before, give or take computer-driven and day-trader whip-sawing.
    4. The Company has fought to stay on the NYSE and I would expect the new shares to continue to trade there, probably with a new symbol, though I don't recall anything stating that for sure.

    Please don't rely on my posts to trade. Discuss the risks with your broker and perform your own research. Good luck to you.

  • Reply to

    Sponge

    by kingedxxxxx Aug 19, 2014 1:28 PM
    sponge_bob_is_no_square sponge_bob_is_no_square Aug 19, 2014 3:35 PM Flag

    Sorry, I don't use yahoo email. Just say what you want here. Nobody but the NSA is reading this.

  • Reply to

    Train has left the station

    by vulcanfire18 Aug 19, 2014 11:56 AM
    sponge_bob_is_no_square sponge_bob_is_no_square Aug 19, 2014 12:09 PM Flag

    Thanks, vulcanfire.

    USU's current short interest is about 1.3 million shares.

    There's still plenty of opportunity for somebody to get burned here. And it will almost certainly happen, one way or the other. The only real question is, burn whom?

  • sponge_bob_is_no_square by sponge_bob_is_no_square Aug 18, 2014 9:06 PM Flag

    One of the elements of the impending capital re-restructuring is that the current 4.92 million outstanding USU shares will be converted to about 400,000 new shares (equal to about 5 percent of the 8 million shares to be issued).

    That may have the same impact as a 1 for 12.3 reverse split. I'm guessing that most of the other 95 percent of new shares will not be in the float and available for sale. Should there be a large short position to be covered as the Company emerges from bankruptcy, we could have a giant short squeeze just as occurred in July 2013 after the last reverse split.

    Could be interesting. But what do I know?

  • Reply to

    waiting...waiting....

    by zohydrated Aug 18, 2014 12:11 PM
    sponge_bob_is_no_square sponge_bob_is_no_square Aug 18, 2014 8:51 PM Flag

    bamorr01, I don't think that "kinged" is short. He's been a long-time poster here. He just doesn't understand the effect of the impending capital restructuring and he's a little short on testosterone, maybe, but not short the stock.

  • Reply to

    waiting...waiting....

    by zohydrated Aug 18, 2014 12:11 PM
    sponge_bob_is_no_square sponge_bob_is_no_square Aug 18, 2014 8:42 PM Flag

    "When was the last time USU had a market cap of $500mm? Based on USU's current situation, it is hard to imagine a value of $200mm let alone $500mm."

    Oh, c'mon. You do realize that $330 million of debt and a boatload of preferred stock are being converted to common stock, right? When combined with the current market cap of common stock, those items get you to about $500 million all by themselves.

    "If, on the other hand, I am right and the market cap is not more than about $200mm . . . ."

    Go back and re-read the second paragraph beginning with "Oh, c'mon."

    Did you buy yourself a few bonds today?

  • Reply to

    Lafitte

    by railhead23 Aug 18, 2014 5:31 PM
    sponge_bob_is_no_square sponge_bob_is_no_square Aug 18, 2014 8:27 PM Flag

    That answer may be for a judge and jury to decide.

  • Reply to

    waiting...waiting....

    by zohydrated Aug 18, 2014 12:11 PM
    sponge_bob_is_no_square sponge_bob_is_no_square Aug 18, 2014 4:56 PM Flag

    " that's the question my trading boss used to ask me (chicen or egg first type question)"

    My trading boss asks, "Chicken or egg salad sandwich for lunch?" And I respond, "Whatever you prefer, dear."

  • Reply to

    Post-bk common stock capitalization

    by sponge_bob_is_no_square Aug 14, 2014 5:22 PM
    sponge_bob_is_no_square sponge_bob_is_no_square Aug 16, 2014 9:40 PM Flag

    kingedxxxxx, buy yourself a couple of bonds. CUSIP: 90333EAC2.

  • Reply to

    Post-bk common stock capitalization

    by sponge_bob_is_no_square Aug 14, 2014 5:22 PM
    sponge_bob_is_no_square sponge_bob_is_no_square Aug 15, 2014 3:17 PM Flag

    "Did John Seward put out bad information?" I don't happen to know the esteemed gentleman.

    His words sound like an old quote. Such language is standard boilerplate, written by attorneys, and always accompanying a company going into a reorganization. The auditors had already placed a "going-concern" qualification in the report accompanying the 12/31/13 financial statements (I believe, without double checking).

    Coming out of bankruptcy, the Company will be using so-called "fresh-start" accounting. That change and conversion of substantial debt and preferred equity to common stock will substantially clean up the balance sheet. Then the future is heavily dependent on Usec being able to generate positive cash flow from operations. The other key is whether they have patched up their relationship enough with DOE to obtain the needed loan guarantee.

    Of course, Team Usec has a long history of ham-handed financial management. So the situation will continue to have plenty of risk.

    So do all lottery tickets.

  • sponge_bob_is_no_square by sponge_bob_is_no_square Aug 14, 2014 5:22 PM Flag

    Coming out of bankruptcy, there will only be 8 million shares outstanding, plus the management-incentive shares. Current shareholders will only own 400,000 (5 percent) of those new common shares.

    Way over half of the outstanding shares will be locked up in the vaults of the institutional investors (old note holders, and preferred stock owners Toshiba and B&W) who won't be selling. And management won't selling their shares either. So that means that the small post-emergence float may continue to be VERY volatile. The small float implies to me that we could have a giant short squeeze post-emergence just like we did in July 2013 following the earlier reverse split.

    Nothing would make me happier, of course.

    My guidance is to short Usec at your peril. It could go nuclear. Or, as some say, nucular.

  • sponge_bob_is_no_square sponge_bob_is_no_square Aug 14, 2014 9:40 AM Flag

    ". . . new 8 percent bond with a par value of $337 . . . ."

    Ooops, typo.

    That should be $377, since there will be $200 million new bonds distributed in exchange for the $530 million in old bonds. That is, $1,000 x 200/530 = $377.

    As a wild guess, the new bonds will trade at a 40 percent discount to par, or $226 each, which would give them a current yield of about 13 percent (inclusive of PIK interest).

  • sponge_bob_is_no_square by sponge_bob_is_no_square Aug 13, 2014 4:20 PM Flag

    • Net loss of $28 million on lower sales volume and significant non-production costs
    • Oak Ridge National Laboratory exercises option to extend American Centrifuge demonstration program into 2015
    • Chapter 11 voting concludes; Confirmation hearing scheduled for September 5

    Go to the website for the entire press release, etc.

  • sponge_bob_is_no_square sponge_bob_is_no_square Aug 13, 2014 10:30 AM Flag

    I'm sure that day traders don't like my approach since they can't trade in and out of the bonds as they can the stock.

    My hope is that the bonds are selling at a discount to their intrinsic value rather than the shares selling at a premium. Of course, the reality likely lies somewhere in the middle.

    But who knows where we will be in a year or two?

  • sponge_bob_is_no_square by sponge_bob_is_no_square Aug 12, 2014 8:37 PM Flag

    Huh?

    I bought a few more bonds today for $331 each. Imbedded in each bond is about $26 in accrued interest (payable in cash upon emergence) and a new 8 percent bond with a par value of $337, which I assume will sell upon issuance at a 40 percent discount for about $226.

    So, after deducting $26 for the embedded interest and $226 for the expected value of the new bond, that leaves $79 of today's bond purchase price for the roughly 145 common shares also to be received, or about 55.5 cents per share.

    If anybody thinks I've got this wrong, please speak up (before my wife finds out).

  • sponge_bob_is_no_square by sponge_bob_is_no_square Aug 11, 2014 9:06 AM Flag

    Approval is almost certain since Usec had 66 percent support from the bond owners going in. Watch for an announcement, hopefully by the end of the day tomorrow.

    Assuming confirmation of the POR, I would expect the stock and bonds to trade more efficiently relative to each other. That means the stock price will likely fall and the bonds rally. If they converge while both rallying, that would make me a very happy camper!

    We're close now. It should all be wrapped up before the end of next month.

  • Reply to

    China to Ban All Coal Use in Beijing by 2020

    by danageorge21 Aug 6, 2014 9:36 AM
    sponge_bob_is_no_square sponge_bob_is_no_square Aug 7, 2014 12:10 PM Flag

    "USEC has problem with Russia unless POTUS backs off public insults of Putin."

    My view is that the growing Russian aggression makes the case for ACP all the more compelling.

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