Who the heck bought those shares? Robinhood traders? And who placed this press release and cashed in on it?
By Wolf Richter for WOLF STREET.
Oil-and-gas producer Denbury Resources – which has $2.2 billion in long-term debt and is approaching bankruptcy, having disclosed on July 15 that it had failed to make an interest payment of $3 million on its Senior Subordinated Notes due in 2023 “in order to evaluate certain strategic alternatives,” thus triggering a 30-day grace period before “default” – saw its soon-to-be-worthless shares go through a wild ride today, starting premarket when they nearly tripled.
Early this morning, a press release, purportedly issued by Denbury, appeared on Accesswire — and then also on AP and others which had paid Accesswire to carry the press release — announcing that Denbury had “received an official offer for corporate buyout at $1.2 a share. This includes transferring full ownership of the company.” The buyer would provide additional liquidity to cover the missed interest payment, and Denbury would continue as a going concern, it said.
This price of $1.20 was over five times the share price on Friday at the close of $0.227 a share. The purported buyer was not named in the press release.
CEO Chris Kendall told Bloomberg News the statement was “completely fraudulent.” In a statement, Denbury confirmed that the press release was “fraudulent and not issued by the Company,” and that it “has received no such proposal,” and that it “has reported the fraudulent activity to the New York Stock Exchange.”
Accesswire then rescinded the fraudulent press release, and it’s gone. AP replaced it with a “Page Not Found” page that included the line, “The page you’re looking for has moved or no longer exists.” An Accesswire spokesman told Bloomberg News that an investigation is ongoing.
Yes, we would like to find out how a fraudulent press release gets published, allowing those folks that had advance knowledge of the fraudulent press release to trade on it and make some bucks off some hapless Robinhood traders who bought the shares at the fraud-induced price and who are now trying to figure out what to do with them.
After CEO Kendall declared the statement to be fraudulent, shares came off their spike. But during the first minutes of regular trading, they still jumped about 50%. And they closed the day still up 12% at about $0.26.
There were numerous reasons not to fall for this scam, including Denbury’s $2.2 billion in debt that would come with the acquisition of the driller. Part of this debt is now nearly worthless. Only a moron would buy a company like this before the bankruptcy filing and take on all this debt.
For example, the “senior subordinated notes” due in 2023, which are unsecured, and whose interest payment Denbury failed to make last week, they closed at 3 cents on the dollar today (via Finra/Morningstar):
A company that would offer to buy Denbury as a going concern, as the fraudulent press release said, would take on the obligation of this bond at 100 cents on the dollar, even though the bond market is saying that these bonds are near-worthless.
Denbury’s “senior secured notes” due in 2024 are trading at 41 cents on the dollar. Funds that specialize in distressed credits generally buy these kinds of bonds, betting that the collateral that they will get in a bankruptcy filing is worth more than the price of the bond, or that they will get a big part of the new company during the bankruptcy proceedings.
The fact that the senior unsecured notes have become worthless and that the senior secured notes trade only at 41 cents on the dollar is a clear indication that the creditors will get the new company as it emerges from bankruptcy, and that current shareholders will be wiped out, holding shares that will be cancelled and no longer represent anything.
But the traders who bought these soon-to-be worthless shares this morning will – unless they unload them to an even greater fool – watch them become worthless in their accounts, where they could sit for years as a line item, representing cancelled vestiges of a knee-jerk trade based on a headline in a market that has become a zoo that has gone nuts.
The bankruptcy epicenter of the oil-and-gas industry is in Texas. Read… The Great American Shale Oil & Gas Massacre: Bankruptcies, Defaulted Debts, Worthless Shares, Collapsed Prices of Oil & Gas
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Wolf, you are really on this…wow!!! The inmates truly run the asylum now…one flew over the cukoos nest has nothing on these markets!!! Making the era of 1927 to 1929 and the robber barons of yesteryear simply blush. The question is, will all hades break loose before the election, or will there be enough of a lid on things until the new year???
“Wolf, you are really on this…wow!!! ”
Yes, Wolf, excellent coverage of a niche topic (bond dynamics near BK).
Since there are going to be plenty of BK company bonds going forward, getting the tracking tools lined up in advance is a smart move.
DIP loans/intra bankruptcy gamesmanship are two more niche topics that are going to gain more and more relevance going forward.
Also, would like to put in another vote for publishing/tracking CCC rated bonds, since they are (surprisingly) hard to ID via the free internet and are pretty much marked out for near term BK Doom according to historical SP default stats.
Crushed stock prices can serve as a proxy, but CCC designation adds a little something…
Ditto for hunting up a consolidated month-by-month, corp debt maturity calendar for all outstanding corp debt…mechanically easy to generate, but surprisingly hard to find via the free internet. Possible to generate by *company* but impossible to find by *month* of maturity.
Of interest because such a calendar would highlight the Götterdämmerung months with high simultaneous bond maturities.
Well if you collected a list of CUSIPs you could do this against firna trace api… I only do this for HYG and LQD underlying…
149 (168 if you include ones without ratings) of the 1181 underlying HYG are rated CCC or lower. only 84 of the 1181 seem like they have payments due in august (may was higher north +200) assuming bi annuall relative to the maturity date.
Sorry may had like ~130,
Thanks for the stats.
Using the FINRA API is a bit beyond my skill level…my hope was that there was a Bloomberg page/specialized database that Wolf has access to that he could easily data mine…posts about the impending failure of specific companies might be faster/easier posts to write, if the right tools are handy.
Your focus on HYG is smart…I have not googled around for individual data on its underlying.
@Cas
Yeah, I understand.
If Wolf was interested, he could get a list of CUSIP and loop over:
tools[dot]finra[dot]org/bondfacts/api/bond/[CUSIP] -> for the bond/note info
api[dot]bff[dot]finra[dot]org/api/[CUSIP] -> for recent price info
maybe using the cusips here (way larger than the +3000 in LQD+HYG combined) -> github[dot]com/leoliu0/cik-cusip-mapping
It would be cool if i could help out with it too.
GC,
Thanks for the code.
Conceptually, API (and internet in general) communication protocols apparently aren’t hugely complicated (more or less relatively simple send and receive instructions) but in practice, the framework tools that would host the code/store the responses are semi-obscure to the casual/Ye Olde Coder audience (where the line numbers at?…)
I have seen passing references to free online API communications tools that further simplify the process…I may circle back to them, if I can’t Google my way to pre-packaged answers (sometimes pages 3+ of Google results can hold hidden treasures…it is remarkable the amount of free analytical work people will sometimes post online)
@CAS
I wasn’t really thinking about needing a server to host it, anyone could just run it on their computer, takes about 40 min for HYG underlying and about 90 min for LQD underlying.
This the python function i use to access the api’s with some comments: pastebin[dot]com/raw/i0bKSKyy
Then you can loop over a list like: `[{“SECURITY ISIN”: blah}, {“SECURITY ISIN”: blah2}, …]` and call `process_firna_bond_data(headers, d)` where headers is a dictionary of http headers to make with the request.
This is nothing new. Fraud is always going on. Wherever there’s lots of money to made you will find lots of fraudsters. Whether it’s individual fraudsters, institutional fraudsters, heddge fund fraudsters, government sanctioned fraudsters.
By the way day traders DON’T do research on the companies. They trade on price movement and volume (maybe). Therefore, it’s easy to get caught in the trap if day teading is your game.
Does the slow moving SEC get involved in this or is Wolf going to Taser them into action?
@Dave,
I recall being in a small cap stock years ago. Some off-the-wall brokerage or advisory outfit downgraded the stock causing it to plunge 30% in a day. My stop got hit and I was out. 2 days later this same outfit upgraded this same stock. Guess they considered it a bargain.
Two forms of Bear Raids:
1) Stop-loss orders, to a market maker, are like ripe fruit hanging off a tree. Sell high, drive the price down, then buy low from all the stop-loss sellers. Then buy the price back up.
2) The downgrade/upgrade that you went through reads more like a classic Jesse Livermore style “market operation”. Someone wants to get into a hot small stock at a lower price, and they have reason to believe that a lot of the current holders are speculative “weak hands”, so they arrange to shift sentiment and shake out a bunch of shares.
Maybe someone was trying to trick the algos into buying?
We will eventually get to the point where more and more Chinese-communist-style, fantasy financial information will be used to pump up stock. Thereafter, we will either see people fleeing with funds to Brazil or some other country or as to others, jumping out of windows.
Much of the chaff within over-leveraged corporations will be removed: e.g., whatever companies cannot survive will disappear. However, this coming depression/recession will be painful for most Americans, who will lose their jobs by the thousands.
I predict that the “Federal” bankster Reserve will no more be able to forestall this forever than it can stop a wave from a tsunami. There are unavoidable laws in economics due to logic and innate human goals.
I can only hope we get to China style regulation: shoot the execs who get caught in the most egregious crimes.
They only take out the execs that are politically inconvenient. The others just get richer and more powerful.
Hong Kong. It seems to loose extradition treaties quickly. Only problem is that real estate is very pricey but a crash could be possible.
This story illustrates new financial religion brought by tech and subsequent high freq trading:
In the short term, quick “technical analysis” replaces fondamentals.
Big picture is SP500 revenue is only about $1400 growing at 4% per year. It’s not really worth much more than $1400 on a long term basis. Price can’t keep expanding 2 or 3 times sales no matter what Fed does.
Actually those bonds jumped 50% today from $2.00 to $3.00
Intraday they plunged 30% from 4.3 to 3.0 ?
For people who don’t look at bonds often: bonds have a face value of $1,000. So when we say they trade at 3 cents on the dollar (or at $3), it means that each $1,000 bond trades for $30, meaning they have lost 97% of their value.
Score… in Robinhood language that is the definition of value.
Mr. Wolf Ritcher, A guy from seeking alpha did the same and I throw his argument in trash apart through using data and financials. Initially seeking alpha kept the article open then later put a lock on it. Go and read my comments if you have access to lock articles. You will find data of all other companies in comparision of DNR.
Regards,
Eddie,
“guy from seeking alpha did the same…”
Did the same what? Did look at the unsecured bonds and see that they’re nearly worthless? A bond with a $1,000 face value trading at $30? Meaning it lost 97% of its value. And has a yield to maturity of 230%?!?! Theoretical yield — because in reality they failed to make their coupon interest payment, and so in reality, there is no longer any kind of yield.
In 25 days, the 30-day grace period is over and the company will be in default, and that’s when creditors get to exercise their rights. To protect itself from creditors blocking and taking stuff, the company will file for bankruptcy protection. There is a credit hierarchy in bankruptcy law. At the top are the secured creditors and at the bottom are the unsecured creditors. Shareholders aren’t even at the table.
If those assets had a value that exceeded the debt associated with them, Denbury could just sell those assets and pay off the debts and have cash left over to operate. But that’s not the case, or else the company would have done it. The company cannot sell the assets for what it owes on them. That’s why the unsecured bonds are near-worthless.
Secured creditors will get just about the whole schmear. Unsecured bondholders might get some crumbs. Shareholders get nothing.
I think Eddie was referring to my article on Seeking Alpha which mentioned similar things to what you discussed above. The second-lien notes look quite impaired (trading at 40 to 45 cents on the dollar) and also add up to 76% of Denbury’s long-term debt. The second-liens will get nearly all of Denbury’s post-restructuring equity.
Eddie’s argument was mainly that Denbury’s balance sheet shows assets that are significantly higher than liabilities, so the stock has plenty of value. However, I pointed out that bankruptcy asset values in oil and gas often are much lower than balance sheet values. One example being Breitburn, which had balance sheet assets $1.3 billion in excess of liabilities, but wiped out common shareholders and significantly impaired unsecured noteholders. I mentioned that the subordinated bonds were trading at 3 cents on the dollar as well.
He didn’t bother responding to those points on Seeking Alpha and will probably ignore them here too.
Elephant Analytics,
Thanks for getting in touch. Yes, I agree, asset values as listed on the balance sheet of a near-bankrupt oil company are meaningless when the price of oil has collapsed. And the bond market knows that.
Eddie is desperately trying to pump DNR. It’s a penny stock and can be moved quickly, as we have seen. I won’t let him abuse my platform for that.
We should know in about three weeks, when the grace period expires.
Someone’s using the PPP to trade stocks just like that guy who got caught using the PPP to trade cryptocurrencies.
The PPP application probably looks like:
– Need x million for Maiden Lane Fed SPV.
—> x million approved!!!
Isn’t that clever using your biodegradeble usually wothless PP to trade crytocurrencies? Now thats creating value. From PeePee to cash!
Too much money chasing too few shares. Money is flooding into stocks from the Fed. Wait until they release the money from the TGA account. 4000 on the S&P by year end?
My guess is several more months of stock gains until the election. A new Pets.com era has begun (without the sock puppet).
Buy gold if you are disgusted by this circus. But it appears stock prices have always been set by M2 money supply, so in a sense, stocks are doing what they are supposed to be doing.
I do wonder, why such the focus on the US stock market only.. there are plenty of other developed countries in the world with well run stock markets (no worse than the bubbly fed US market at least) that are not trading at stupid multiples.
Places like Singapore, the UK, South Korea, Norway, Austria all are advanced developed economies, have very reasonable non-bubbly multiples / CAPE ratios and are easily accessible through relatively cheap (for international investing) country specific index funds traded on US exchanges (ishares..etc). I see a bunch at Star-Capital’s Shiller website.
Am I missing something? There are plenty of assets in other stable developed countries at affordable prices and returns..
Why always the focus only on ‘gold’ and US markets only when there are so many other reasonable options out there to invest in? Its like the rest of the developed world doesn’t exist when you read any of these news articles..
Just wondering..
Perhaps I am over simplifying, but all markets are connected and, if anything, they’ll at least all mutually collapse. Might as well be at the main event.
Hmm, well they might, but the US right now has a CAPE ratio of 30 (totally out of sight!), while Korea has a Cape of 12.3, Singapore of 11.4, Austria of 11.5, UK 13.1.. all very reasonable and historically low or stable for all of those countries.
So it is unlikely those markets will crash anywhere to the degree that the US market will some day (or stagnate) given their already very low CAPE ratios. You get lots of earnings bang for the investment buck over the medium / long term versus the US.
And there is nothing wrong with any of these countries, they are generally first world managed modern economies not any worse than the USA.
And I won’t even get started with future potential weakening US dollar strength due to all the US money printing… :-)
hmmm.
Agreed with Sea ^
If you own stock, what exactly can you do with company earnings? Unless the stock pays dividends, you can do nothing with company earnings, except try to correlate those earnings with other people’s valuation of the stock.
It’s all a big sham really. Stocks have no intrinsic value and yet people act like they have some intrinsic value tied to company earnings. They do not. Their only value is in selling to a greater fool.
Given that, you should want to be in the ‘hottest’ market, which is the U.S. market. When the U.S. market collapses, you’ll want to be out of it first. That’s the game.
That Star-Capital map thingee is very useful…highlights the point you are making…there are established nations with less mad metrics than the US (American capital flight/ruin has been brought to you by the Fed…the Fed, your gvt at work).
Overseas investment becomes more and more viable once relocation becomes more and more plausible (because relocation removes the potential offset effects of adverse FX movements).
The Fed is not a govt agency
Chris A,
Common misconception here. The Fed is a hybrid organization.
The Federal Reserve Board of Governors is a government agency, and the members of the board, including Chairman Powell, are employees of the US government, appointed by the Prez and confirmed by the Senate. They have a government salary and a government pension.
The 12 regional Federal Reserve Banks are not government agencies but private corporations that are owned by the financial institutions in their districts. The 12 FRBs include the New York Fed, which does most of the Fed’s trading of securities.
Anybody who believes the Fed would long stand in dramatic opposition to the G’s desires (read currency debasement to bail out the G’s multi decade perfidy/incompetence) has to ask themselves how many armored divisions the Fed has…
There are the “rules” for public consumption…and then there are the Rulers.
Sea Creature
My 2 cents:
1) Somewhat difficult to research foreign stocks and trading conventions on foreign exchanges
2) You’re actually taking 2 different risks: risk on the foreign stock, and possible USD-to-whatever foreign exchange risk
@Javert,
Yes, but if you invest in multiple countries, you are distributing that FX risk (and actually reducing US dollar risk given the Fed is printing like mad). There is risk in holding only dollars given how much we import from overseas. A basket of developed currencies is actually safer.
As well, developed countries FX do change, but not anywhere near those of less developied or “emerging” countries.. i.e. a Burger, Fries and Coke cost more or less about the same in USD in any of those places and doesn’t really change that much.
And yes, the star capital site is really good for seeing what opportunies exist overseas, as is the “Multpl” daily shiller site, for seeing how crazy things have gotten in US markets in comparison.. :-) The US market is not only disjuncted from history, but from the rest of the world as well. It is like Japan in the late 80s.. :-)
Sea Creature,
“As well, developed countries FX do change, but not anywhere near those of less developied or “emerging” countries.. i.e. a Burger, Fries and Coke cost more or less about the same in USD in any of those places and doesn’t really change that much.”
Really/
Fooled me then!!
The idea of the Big Mac Index was quite good, but it suffers from numerous problems.
It uses PPP theory as a basis for comparison.
I’d rather look at how much a BM costs in terms of minutes of work at minimum wage to buy one.
That will tell you a whole more about prices, wage costs, and living standards………………
Supposedly the A$ is currently undervalued by about 25% against the dollar using the index.
The price of a BM here in Oz is $6.60. Minimum wage is a whopping A$19.84 per hour for PT and FT work. Casuals get 25% more per hour.
So it will cost you 20 minutes of work to buy one at the minimum wage if you are a worker on minimum wage.
How about in the USA?
I guessit depends on where you live and the minimum wage there, but the Federal minimum wage is US$7.25 per hour and the average price of a BM is US$5.71
So in the USA a federal minimum wage worker will have to work 46 minutes to buy a BM.
The Australia minimum wage worker only has to work 20 minutes to buy the same item that takes a USA minimum wage worker 46 minutes.
Does this mean that the A$ is overvalued or undervalued when looking at wage costs?
Oh, I forgot to add that in Oz FT workers are guaranteed 20 days of vacation a year, sick leave of at least 10 days a year and payment of 9.25% retirement pay (Superannuantion) which all adds up to higher wage costs for employers.
These are pro-rated for PR workers.
And then there are other benefits as well depending on the Industrial Award under which you work.
For example, most people also get a top up 17.5% of their wage when taking that annual leave or extra loading for doing types of work such as in ‘wet places’ when the employer doesn’t provide protective gear (an additional 4% of the hourly wage), etc, etc, etc.
@chip
1) yes, pressing on EN in the right upper corner is difficult and it is not like the large caps have almost all their information also in English, even the CAC40
2) How much risk is there anyway with global companies. A European large cap will likely be overweight in Europe but its difference between it and its American competitor is not that large.
@Lee
Minimum wage is highly political. In some countries it is the wage people are getting paid if they are in a low paying job. in other countries it hasn’t changed for 40 years and the ruling politicians are for scraping it but can’t for political reasons and literal everybody is being paid more
Sea C,
“There is risk in holding only dollars given how much we import from overseas.”
Interesting point vis a vis FX risk of holding foreign equity ETFs…had not really thought about it in these terms before (thus is the legacy power of the murdered Dollar).
Will have to reflect upon this point some…major capital placement implications to the extent 100% true.
Bottom line…to the extent the G is wholly committed to dollar debasement to offset catastrophes of its own creation (all evidence of last 20 yrs points to this)…then the future of FX risk actually lies in holding…the dollar (which is doomed to never appreciate again).
Once this becomes a common perspective among habitually exploited dollar savers, the G will see unprecedented capital flight from the gimp Dollar (think Pulp Fiction).
Char,
The minimum wage in Australia has gone up every year for years on end.
In fact I can’t ever remember it not going up. It has never gone down.
And as the minimum wage increase is used as a basis for many other wages in Industrial Awards those usually increase as well.
And for many jobs the minimum wage is meaningless. A plumber, bricklayer or painter here in OZ will pull down multiples of that.
IIRC a plumber charges something like $85 -90 a hour now.
I get a kick out of all the house remodeling shows in the USA where they redo a house for XX dollars. In most cases that total wouldn’t even pay for the plumber and electrician!!
Investors go where the growth is, and tech is the one place you might see growth (note the ‘might’). American stock indicies are tech weighted while European indices are heavily bank weighted and European bank profits (or nonprofits) are influenced by the ECBs negative yields. Hence investors flood into the US market seeking the potential for growth. US fiscal will go bonkers before the election, and the US has at least the potential to push yields up.(symbolizing growth, although devaluing your currency is looked poorly upon if you’re not the world’s reserve currency). Europe can’t agree on a fiscal stimulus policy (more debt), so there’s less potential room for growth. This strengthens the Euro and weakens the US dollar.
Why gold? Gold senses excess money supply (liquidity or what people can borrow). Right now we are in a deflationary scenario. But inflation EXPECTATIONS are driving the price of gold up, as the markets says that the Fed will pump so much money into the economy that the dollar will continue to drop, and we’ll have higher prices from that process alone. This is asset inflation, not true economic growth.
Given that real yields are dropping like a rock, the utility of holding gold (which yields nothing) becomes more reasonable next to holding Treasuries which at the present time are yielding next to nothing.
The covid shock is potentially the most inflationary even of the last forty years. Globalization was deflationary because of productivity enhancements (which includes a global fungible labor supply and just in time supply chains). The covid shock is inflationary because it introduces chronic inefficiency. And inefficiency is inflation’s best friend.
So why bother with stocks if the sole reason they’re rising is money supply. You can make money much more safely with gold under the current conditions of low real yields. Try the gold miners if you’re still partial to that space.
Nope, money supply has started contraction. The lags kill investors. Globalization didn t bring efficiencies, it brought debt and nothing else. This debt created bogus consumption.
Your still in May.
Nah, it’s more the endstage of CARES. Fed has been withdrawaling liquidity for weeks. CARES is out of gas now, so money contraction is next.
They’ve tried to withdraw liquidity before. Have you forgotten? They always come around with another round. With unemployment checks soon to be extended, the next round of QE seems obvious, doesn’t it?
They have been withdrawing liquidity, but even at the lower levels they’re still doing more monthly QE then they did for most of the “last” crisis.
The difference this time is the dollar When will it totally lose its status as the go to international currency? In my opinion that is what makes Dollar denominated assets a mistake going forward
The only chart you need is the monetary base. Gold is also linked to the paper fraud. The monetary base was shrinking BEFORE the pandemic, hmmm? The notion that more of something makes it MOAR valuable is not new. Critics demand new stock issuance must be dilutive when in fact increasing the float allows larger institutions to participate. Expanding the number of anything makes that quantity less volatile, the thinking goes. Then the thinking changes, and Covid arrived to tell us even a few deaths is too many. Even a little fraud is too much.
The SEC ought to be able to figure out who sold…. if there was such a thing as the SEC
LOL, once again, good coverage
US247916AM12 and US247916AH27 closed at 41.25 and 42.375, respectively on friday
Jerome is new proud owner of these new defaulted trash on 10x future tax payer money!
Best Fed money can buy.
Crypto traders have moved from bitcoin to stocks.
i hope they used their crypto gains to leverage up on that trade. there is the robinhood safety net after all. what could possibly go wrong? i’m just glad i stocked up on my favorite style of chuck taylor’s while you could still find them… no worries about shoe inflation or supply chains here!
Greed on one side, and complicity from the media from the other. AP, one would assume that’s Associated Press, not exactly your daily tabloid here, but somehow it managed to screw up something that simple. Amazing that it just parrots whatever is being said out there, amplification is probably one of the worst things that can happen when we have a news media that sees clicks and eyeballs as its primary goal.
As for the people who are buying and selling this stuff, they are being sucked in, and the culprit is the usual one in this case, the utter lack of real education, especially financial education by our educational institutions. Still, in these times, what could one expect other than the strong preying on the weak.
One wonders if there is going to be a SEC investigation to identify the criminals involved here. Somehow I doubt it.
To be fair to AP, its just a verbatim press release.
https://apnews.com/press-releases/accesswire
I don’t disagree with the state of news media and the internet, but verifying pure PRs is Accesswire’s job.
You always have to wonder about the degree of responsibility. AP is media, not technically unlike NYT, or FB, yes, I did just lump the garbage pile that was social media in the same basket as the news media.
Why? Because functionally, they serve the same purpose as the towncrier in terms of amplifying messages. Now, if one can absolve FB or Twitter for the messages they are constantly amplifying, then I suppose AP could be absolved too. But then under that guise, AP or its likes should hardly be in a position to criticize places like FB or Twitter.
If anything the same standards should be applied for these mediums that amplify information.
MCH
Town crier or village idiot????
SEC is a captive regulator to Wall St just like FAA to BA!
In fact ALL Federal regulators are captive to industries they are supposed to regulate!
Rotating door – business = Govt regulators and back!!
“…press Release of buyout nearly triples stock…”
perfectly fits definition of “insider”, albeit a self-made one.
what’s good for the musk, is good for the ox?
Gotta push those flaming ox carts some how ..
With money contraction about ready to start again, it will be interesting to watch oil prices. Bet they fall under 30$ again.
Ah, Denbury…………………………
The company has a connection to Australia too.
Years ago there was a company called Elk Petroleum that had a property in Wyoming and was undertaking CO2 enhanced recovery from that property.
Like many other wann-be mini oil companies in the land of Oz, they took their eyes off the big picture and started doing this and that and not concentrating on their main asset.
Then somewhere along the line they ended up partnering with Denbury – IIRC they (Denbury) ended up putting millions and millions (hundreds??) into the project and as a result of their actions after the joint venture was established were sued by Elk Petroleum.
The suit was resolved, but the damage had been done.
Then the next chapter in Elk’s history was writen when they were able to buy a producing field and did so by issuing mainly preferred shares and debt.
All seemed to be going well until one looked at the terms and conditions of the preferred shares whcih were basically buried (hidden) in the company statements. (And it appears that even more terms were hidden from everybody as well.)
The preferred shares terms were unreal to the buyers and conveyed a perpetual interest in the companies’ cash flow and assets even after being redeemed. (Is that even legal?)
Once the price of oil and natural gas crashed along with the mess that was ongoing with their Wyoming oil field, Elk filed for bankruptcy.
Had Elk focused on their main asset and not gotten involved with other things they could have been a great company.
Shares on issue went from something like 50 million or so up into the billions.
I lost track of what happened to the company’s Wyoming enhanced CO2 oil recovery property whan the bankruptcy filing was announced.
It would be interesting to see what happened to and who ended up owning it.
So I guess Denbury is getting a dose of their own medicine this time around. Serves them right.
Investor scams are nothing new to oil and gas. It’s called “drilling on wall st.”
“Scam”?
The company was real and the asset was real. Denbury had expertise in the recovery and generation of oil from using CO2.
The ‘scam’ if you want to call it that was:
1. The BOD of Elk ran all over the place throwing money at this and that which forced them into the JV.
2. Elk sued Denbury as it was playing games with the CO2 for the project.
3. The preferred shares wre structured so that the company would never be ‘free’ from them and the obligations to the buyers of the shares. Of course, nothing will ever be done to those who set up and structured the shares.
4. The price of oil and natural gas crashed. Elk was actually producing a good volume of oil and natural gas (IIRC they hedged as prices went up and missed the extra value as well.)
And IMO even if the price of oil remained high the preferred shareholders would have ended up owning the company.
There are (were) quite a few Australian oil and gas companies operating in the USA. Several have had great results and most others are what we term :
‘Director Lifestyle Companies”.
They exist to drain funds from shareholders to pay for their salaries and expences.
For example, at one time Elk had something like a total of maybe 10 – 20 employees including the BOD and company officers, yet the Company Secretary was pulling down around $A150,000 plus a year.
Add in all the costs for the BOD and company officers and the amounts were huge.
You know… thats actually a great (and terrible) scam.
If I were a black hat reading this article, I’d immediately start poking the servers of some PR companies. There are a number of high and low tech ways you could get a bogus PR published. In fact, I wouldn’t be suprised if someone at Denbury got hacked or conned.
That’s already happened before, it will happen again.
Wow, that is why there are fines and jails. This is an easy investigation provided there is the will to do it.
Article today in CBC about Canada’s Oilpatch. Basically, at oil around $40 most companies are treading water. Oil service companies here have suffered cutbacks, and major projects are on hold, but the industry itself is in better shape than Shale. Plus, the demise of Shale will only be helpful for Canadian outlook.
Paulo,
“Plus, the demise of Shale will only be helpful for Canadian outlook.”
I’m confused. You mean the demise of shale in Canada? Whose demise would come only AFTER the demise of tar sands production in Canada, which is even more expensive than shale oil production. What’s confusing me here is… how can the demise of the Canadian oil industry be “helpful for Canadian outlook.”
Or do you mean the demise of the US shale oil and gas industry, while the Canadian shale oil and gas industry and the Canadian tar sands industry somehow miraculously thrive?
The tar sands have the advantage that a tar sand “well” or whatever it is called will still be producing in ten years. Unlike a shale well which will be nearly dry in 4 years. So getting a loan now that will be repaid in 8 years is possible for tar sand but not for shale.
Tar sands production is only more expensive than fracking if you’re setting out to build a new operation. Existing extraction is operationally profitable at about 25-30$, with the main inputs being natural gas and diesel, both currently very cheap.
Also, much of the oil sands production is done by large vertically-integrated companies (Suncor, Imperial, Husky) for whom cheap oil is an input to their refining and retail operations. They don’t have huge amounts of debt relative to their size and they don’t have significant exploration expenses. Large producers in the US like Exxon and Chevron have sold off most of their refining and retail and can’t benefit in the same way.
I expect a lot of smaller operations to get absorbed by the bigger ones where the assets have some value and overall production to decline. Certainly, there won’t be much in the way of major capital expenditure going forward.
Fracking is a much smaller percentage of Canadian oil production than in the US and nobody was making huge loans to Canadian fracking operations over the last several years in the way that happened in the US. The upshot is that the overall financial health of the Canadian industry is much better in the sense of being the fastest horse in the glue factory. If 50% of the US fracking shuts down, then 80% of the overall Canadian production will survive.
Don’t worry, within 6 months everyone will be driving a Tesla and oil demand will drop to zero.
Those twitter hacks cashed out $120K in BTC, albeit untraceable if they did it right.
They could have gotten a lot more with stonks if they had issued fake Twitter press releases.
This morning, i quickly scanned over a funky $17.5b acquisition by Eldorado Resorts of Caesars Entertainment Corp. A ton of junk debt involved.
To think that heavily indebted Eldorado had a market cap of $350m at the beginning of the lockdown. Now it’s involved in a monster $17.5b merger.
I’m thinking it would be difficult for executives involved to keep a straight face.
akiddy111,
“I’m thinking it would be difficult for executives involved to keep a straight face.”
Yes, very well put. I think that’s the truth with a lot of things going on these days.
Wearing a covid-19 mask means you don’t have to even try for a straight face. Put on sunglasses and have total anonymity. Lying couldn’t be easier.
Heh. I was in a McDonalds where a mask is required. And I was wearing sunglasses and a hat as well. I went to the bathroom and looked at myself in the mirror and realized that I had, like you said, 100% anonymity. It was an interesting realization.
Well from midnight tonight we are all mask wearers in Melbourne and about time.
First changes already out even before the rules start.
Now you don’t have to wear a masking while driving by yourself or with a family member.
Wonder if you have wear one when working in your garden?
You don’t have to wear a mask in a bank. (Why not?)
Also many businesses are requiring masks as well.
Still don’t agree with wearning a mask when I’m walking the dog at 10pm on an empty street though!!
The explanation from Bloomberg is magical. “Eager U.S. gamblers returning quickly to casinos after the Covid-19 lockdown helped Eldorado Resorts Inc. sell almost $8.8 billion in debt and stock needed to complete its takeover of Caesars Entertainment Corp.”
You don’t need a straight face when you have magic.
Back around 2000, there was a company called Emulex which had a similar thing happen: https://en.wikipedia.org/wiki/Emulex_hoax
At the time I owned Emulex stock… it was a pretty wild moment. The difference is they were not in trouble and you couldn’t trade off your phone. Been seeing a seeing a bunch of references to “dotcom mania bubble redux” over the weekend, and then this happens…
I’m surprised that there apparently is no mechanism to make the trades, made after the false press release, invalid and roll them back.
It should not be that difficult to do.
I strongly suspect this was a “tailored” trap, made with in-depth (inside?) knowledge of some of those supposedly sophisticated software now running the equity and security markets.
A 5X premium, even for the hostile takeover of a penny stock, is simply nuts, no human being would have believed it: to give an example of hostile takeover Intesa Sanpaolo is presently attemping on UBI is being done at a 70% premium, which is still very generous in my opinion.
But unless the software has been programmed to sniff out stuff like this, it will fall for the news and place a buy order. By the time a human notices the supposedly sophisticated software has been taken for a ride it’s usually too late, even if this happens just a couple of hours later.
It will be interesting to see what the SEC will do: this is exactly the kind of stuff they exist to investigate. It’s well possible this was a case of excessive exuberance, lax oversight and technical glitches in which case all parts involved will get away with a very mild warning and perhaps a small fine. But if this was a willing manipulation of HF software they will just have to intervene, and this time a slap on the wrist like Ellon Musk got for his infamous “Funding secured” tweet won’t be enough. It’s a nasty world outside of the big front page stocks.
These trading apps operate as dark pools, the trades can be filled from the firm’s own account. The money they make is by letting the big boys watch the order flow. Eventually some money has to leave the dark pool to fill orders and the big boys are ready and in the money.
They way these apps operate reminds me of the Epstein scandal. Lurid things happen on an island(the dark pool), bad guys get to watch and profit(order flow and front running), and players get blackmailed(lose their money).
Hi Pet! Gee, anyone can watch the order flow. You just have to pay enough for the feed. We can’t afford it.
My suspicion is more towards proper trading software than apps. They are a dime a dozen nowadays.
Even one my banks pushes one of those things: they will sell you the license for a monthly fee which also includes a secure server for transactions and real-time stock price movements.
Just like with everything else, you get what you pay for: these low-level trading software are not only pretty “dumb” (meaning their filters and logics are nothing to write home about) but they are also designed to trade over ordinary Internet connections, not the microwave networks used by professional high frequency traders.
There’s an old Japanese saying “A great weapon in the hands of a novice will find its way in the hands of a great warrior”. That’s exactly what will happen to these wannabe samurai and their money.
I truly realized that we are all being front-run a number of years ago when I did the math to calculate the differential in propagation times between fibre-optic and microwave. Microwave can win by milliseconds depending on distance and that’s enough. They win, we lose.
When the software comes from the seller, they control it, every aspect of what you see and do. I wouldn’t trust the screens from any of the providers, especially, if you are frequently missing the bid.
The Fed thinks funny money thrown at finance industry is the cure for all problems. Lets open our perspective for just a moment, to compare other courses some are choosing:
Which of these might work better in terms of creating jobs?
1). China’s BRI makes entry in post-Covid-19 era:
Belt and Road Initiative highlights — especially, among the emerging economies across Afro-Eurasia — can be enlarged and strengthened ‘to get people back to work, get food on the table, making sure that people are being paid, that they have jobs to do.
2). Ivanka Trump jobs program for Americans:
FindSomethingNew helps workers of all ages and backgrounds identify the right path for their career goals by recommending multiple edu pathways, providing aptitude testing, offering a directory of critical resources for child care, food assistance, internet access and more.
Were I young, and unmotivated, and maybe even dumb, I would go for option #2. I’m sure I could flounder around in testing and training for at least a couple of years and not have to go to work.
I know free-college-tuition students who played the same game. All became drop outs.
Remember, if it’s free it ain’t worth anything.
FindSomethingNew should be renamed to FindASugarDaddy.
It’s Ivanka’s Let Them Eat Cake moment.
Option 2 sounds like what High School guidance counselors used to do in the 50’s and 60’s!
The marginal oil companies go bankrupt, then they may no longer borrow money to drill. They stop selling oil at a loss. Production goes down.
Why was WTI oil rising in price earlier today?
Robinhood traders. 27 year olds who couldn’t tell you the difference between a P/E ratio and EPS but are super duper savvy investors. You know that saying how if at a poker table you can’t figure out who the sucker is, you’re the sucker. RH traders are the suckers in the big Wall St poker game.
“where is the SEC “is a great question for all to ask! It’s going to be interesting to hear Tesla’s conference call this week. If there was ever a fraud this is one but then Musk is connected and walks on water.
Wolf, you are just jealous that you can’t get rich by fooling stupid people. You’ve got a good blog going here – punch up something and cramer the idiots.
Retire in Japan country-side where RE has got to be cheap now.
Sorry, I’m in gold and silver and doing just fine.
Don’t give me ideas ?
Yes, real estate in the “country” areas of Japan is cheap and it probably going to get even cheaper unless there is a massive move back to the country movement.
The real estate market in the country areas of Japan isn’t a ‘real’ market with very few properties actually selling even though there is a massive number of empty, vacant or abandon properties there.
And unless you already have a visa to live in Japan or are married to a Japanese national I doubt that many would be able to get a visa ‘to retire in Japan’.
And given the huge recent changes to tax and reporting requirements why would you if you have any reasonable amount of assets or ‘be in the market’ to get a bunch of bucks when somebody dies and leaves it to you?
(Numerous discussions on various blogs why the changes have been called screw the foreigner taxes and laws.)
And with the latest, what I’ll call flat out bullshit, with regards to the bans on re-entry by foreigners by the Japanese government even if you have PR or a spouse visa, why would you even think of making Japan your home or for that matter establishing a business there?
On the other hand if you are young, have decent skills, and not much in the form of assets, yes, Japan would be a good place to get started and live if you are able to put up with a lot of the crap there.
Amazing isn’t it: in Australia citizens, dual nationals, and PR residents can’t leave Australia, but can get back into the country. In Japan, citizens can return, but PR, spouse visa, and other foreigners can’t get back in if they have left or won’t be able to get back in if they leave.
Among the G7, Japan has been the worst country with regards to its treatment of foreigners in regard to entry and exit.
The real fraud is the collapse of the dollar. Another 3 trillion of “stimulus” should take’er to 80 on the DXY by spring. De-basement and the “non-existent inflation” has already ate up a chunk of episode 1 stimulus and episode 2 “in progress” will be going ,going and gone right behind ep 1. Love that simulus sugar water , so gooooooood………However,my Keynesian Barbaric Relics are making me smile. My ass has been kicked in SQQQ. I could not get to Scotland to Salmon Fish in the Strathdean so I went fishing with SQQQ. I will use all my bait in hope of netting me the elusive and wily Tesla Short-sail Fish.
play in the bio sector, this is common place and the SEC is a non existent entity in this sector……MM’s kill retail before a symbol takes off…..then make you chase it…..
A little RBL relief courtesy of the retail investor. Which bank was that I wonder? and would it have initiated the big dasiy-chain event?