doc75 Posted November 18, 2018 Share Posted November 18, 2018 This is no different to everyday capital budgeting and selecting projects based on shortest payback period, when capital is the limiting factor. We just end up with 2 porfolios and a bar-bell approach; an 'A' portfolio of risk-adverse T-Bills (our own capital contributions over time), and a 'B' portfolio of risk-on unrealized equity gains/losses (stub positions). As long as we fund from the 'A' portfolio under payback period criteria, and systematically invest & withdraw from the 'B' portfolio over time under standard investment criteria; our pile of T-Bills will keep growing, and we will sleep better and better through time. The B portfolio also never exceeds a maximum X, ensuring that we systematically take $ out of the casino, and permanently increase our wealth. We could have simply put LEAPS in the B portfolio, & just been done with it. Holding a stub equity position versus a LEAP (assuming availabilty) allows us to avoid the time decay. Obviously, not for everybody, and just a different approach that has worked very well for us over time. SD Agreed with Liberty and others that this argument is nonsense. Admittedly, your posts rarely make sense to me, and the jargon/content ratio is generally a little rich. (Equity stub?) [Earlier response edited for civility.] Link to comment Share on other sites More sharing options...
SharperDingaan Posted November 18, 2018 Share Posted November 18, 2018 What is a sunk cost? https://www.investopedia.com/terms/s/sunkcost.asp?partner=asksa A sunk cost is a cost that has already been incurred and cannot be recovered. A sunk cost differs from future costs that a business may face, such as decisions about inventory purchase costs or product pricing. (1) Sunk costs (past costs) are excluded from future business decisions because the cost will be the same regardless of the outcome of a decision. (2) If a sunk cost can be eliminated, the cost becomes a relevant factor and should be a part of business decisions about future event. Today your outlay is 100K. Tomorrow it is zero, but you still have 1/2 your position. Per (1) the before and after outlays are not the same, only the remaining outlay is a sunk cost, and it is zero in this example. Per (2) as soon as the outlay was reduced/eliminated, the amount eliminated became a relevant factor. The only place we are subject to sunk cost fallacy is when we make the initial investment. And our focus at that time is on getting our outlay back as rapidly as possible within our specified payback period. SD Link to comment Share on other sites More sharing options...
Liberty Posted November 23, 2018 Share Posted November 23, 2018 That oil selloff just won't quit, eh? -7% this morning to $50... Link to comment Share on other sites More sharing options...
aws Posted November 23, 2018 Share Posted November 23, 2018 I have fond memories from October 2015 in buying this stock around these prices and flipping some for a 150% gain two weeks later. Similar things happened in several over leveraged names that year after a quick rebound in oil prices or asset sales juiced the stock. It was one of the big reasons I liked being in some of those names is that it seemed like I could count on something irrational happening with the price for a while which would allow me to sell at least a big piece for a good profit. Now everything in Canada just seems left for dead, although with the differentials it is not exactly a surprise. Link to comment Share on other sites More sharing options...
dutchman Posted November 23, 2018 Share Posted November 23, 2018 Wasn't there some young wealthy guy who put a lot of money into this name? I think he recently wrote a book too. Wondering if he's changed his thoughts on the company. Link to comment Share on other sites More sharing options...
Liberty Posted December 18, 2018 Share Posted December 18, 2018 Things going so badly that the government is offering bailouts to the oil sector now? https://www.bloomberg.com/news/articles/2018-12-18/canada-said-to-offer-1-1-billion-in-loan-support-for-oil-sector Link to comment Share on other sites More sharing options...
SharperDingaan Posted December 18, 2018 Share Posted December 18, 2018 1) The C$500 million will be for “higher risk but viable oil and gas small business enterprises,” and spread over three years. 2) The government will also announce C$50 million in direct funding for at least one oil and gas project that hasn’t been identified publicly, and C$100 million in funding for oil and gas projects related to economic diversification. 3) Another phase of federal measures could also be announced later, one person familiar with the plans said, speaking on condition of anonymity. What are the odds that there's going to be an expanded Alberta refinery for WCS, and an Alberta CO2 collection and sequesture facility. And what are the odds that this funding is on a 1/3 federal, 1/3 provincial, 1/3 private money basis. Good on them. SD Link to comment Share on other sites More sharing options...
Spekulatius Posted December 18, 2018 Share Posted December 18, 2018 The government would be better of to ensure that the crude can be moved, instead if supporting the production side. As far as I no, there is little progress on the Transmountain pipe purchased from KMI. I also think that the government should encourage and support building a refinery in Alberta. Both moved would help to reduce the spreads to WTI, which is the real problem. Link to comment Share on other sites More sharing options...
bizaro86 Posted December 18, 2018 Share Posted December 18, 2018 The government would be better of to ensure that the crude can be moved, instead if supporting the production side. As far as I no, there is little progress on the Trandmountain pipe purchased from KMI. I also think that the government should encourage and support building a refinery in Alberta. Both moved would help to reduce the spreads to WTI, which is the real problem. Yeah, AB producers don't need loan guarantees, they need egress. Since the Federal Gov't owns the most likely pipeline candidate, I'd way rather have them fund expedited consultation and whatever else is needed to get that built ASAP. Link to comment Share on other sites More sharing options...
SharperDingaan Posted December 19, 2018 Share Posted December 19, 2018 Sadly, it would also seem that the Fed really needs to replace their Alberta 'press agents' asap. One has to be truly gifted to screw up this badly - twice in a row! Keystone, and now this. We don't know the projects this money is for (later announcement), but most would expect that in Albertas economy; 'diversification' means either electricity generation (export electricty versus o/g product), oil refining, or CO2 sequesture. We, 'the people', own a pipeline (& the right of way) going west. But for product to actually flow - Alberta/Canada needs to plausibly demonstrate that Alta carbon emmissions will decline going forward (despite growing production), and that tar-sand extraction is of clear net benefit (net of the total environmental costs) to all Canadians. Show that Alta is going to industrial CO2 sequesture to lower total C02 emmissions, and reducing bitumen production - by refining more of it; and maybe construction on Keystone can restart this summer? Few dispute that pipelines are safer than rail, and nobody wants another Lac-Magantic. Few also dispute that a spill of gasoline is less polluting that a spill of bitumen. But very few realise that an existing 'right of way' can also also accomodate an additional pipe - a smaller diameter gasoline pipeline to the west coast, in addition to the existing Keystone pipe. And that once Albertas refining throughput warrants it, gasoline could flow through Keystone vs bitumen. An organized industrial policy from which every Canadian would benefit. And the more Alta WCS production getting locally refined, the less there is going 'south'. Putting a rising floor price on the value of that bitumen being produced. Of course ... this is 'heresy' to the existing established 'arrangement', hence the belligerence. From gents who will be either dead, or in the minority, within 10 years. Change. SD Link to comment Share on other sites More sharing options...
Joe689 Posted January 16, 2019 Share Posted January 16, 2019 You do not see this everyday! FrontFour, OBE's largest holder, activist, board member, executes a contrary instruction to exercise an extremely out of the money option. They buy over 2 million shares at 90 cents on the day the stock is trading near 40 cents. Go figure.... Then a week later they buy 300K open market, 38 cents. Link to comment Share on other sites More sharing options...
Liberty Posted January 16, 2019 Share Posted January 16, 2019 You do not see this everyday! FrontFour, OBE's largest holder, activist, board member, executes a contrary instruction to exercise an extremely out of the money option. They buy over 2 million shares at 90 cents on the day the stock is trading near 40 cents. Go figure.... Then a week later they buy 300K open market, 38 cents. Sometimes insiders are smart and know something we don't. Sometimes they're just setting money on fire and making mistakes... ¯\_(ツ)_/¯ Link to comment Share on other sites More sharing options...
benhacker Posted January 16, 2019 Share Posted January 16, 2019 I cannot explain this action... it's beyond bizarre. Years back, NTP CEO did this (early exercise of options slightly out of the money) due to ill-liquidity and obscene (mis)valuation of the shares... however, while I would agree that OBE is vastly cheap on an asset basis, and it's not "liquid" excercising >100% above price options without first trying to buy seems odd. Anyone have a (rationale) explanation? Trying to force cash into OBE for some reason? Trying to do something weird for taxes? Seems too far from the market to explain unless they contractually agreed to exercise when the price was higher... I don't get it. Link to comment Share on other sites More sharing options...
Pelagic Posted January 16, 2019 Share Posted January 16, 2019 I cannot explain this action... it's beyond bizarre. Years back, NTP CEO did this (early exercise of options slightly out of the money) due to ill-liquidity and obscene (mis)valuation of the shares... however, while I would agree that OBE is vastly cheap on an asset basis, and it's not "liquid" excercising >100% above price options without first trying to buy seems odd. Anyone have a (rationale) explanation? Trying to force cash into OBE for some reason? Trying to do something weird for taxes? Seems too far from the market to explain unless they contractually agreed to exercise when the price was higher... I don't get it. I'll agree it's bizarre. The ill-liquidity explanation makes the most sense. He represents a hedge fund with something in the order of 25M shares and from what I understand, .90 is still below their cost basis. Makes a lot more sense to buy at .50 or whatever it would end up being as their purchases presumably push the market price up, but I guess they can still do that too if they want. The other explanation I've read that makes some sense is if the options converted to shares represent a longterm taxable gain whereas buying shares now and selling within a year wouldn't. Still, not something you see very often. Link to comment Share on other sites More sharing options...
benhacker Posted January 16, 2019 Share Posted January 16, 2019 I guess if there is a buyout at a large premium within 12 months then the tax angle works. Interesting. Could also be a typo in the form or something. Wild. Link to comment Share on other sites More sharing options...
Joe689 Posted January 16, 2019 Share Posted January 16, 2019 Doing the math between short term and large gains percentages, the buyout price would have to be near 2 USD to make it worth compared if they bought 2.3 million on the open market, for say 65 cents, short term Link to comment Share on other sites More sharing options...
benhacker Posted January 17, 2019 Share Posted January 17, 2019 Doing the math between short term and large gains percentages, the buyout price would have to be near 2 USD to make it worth compared if they bought 2.3 million on the open market, for say 65 cents, short term Yeah, it's bonkers. The NTP example above he excercised at $6 and sold for $18 about a year later IIRC... but I think this is the only example of something like this I can recall so hardly predictive. I can't explain it though. Link to comment Share on other sites More sharing options...
yzstevie Posted January 17, 2019 Share Posted January 17, 2019 Where do you see this information on Frontfour? Couldn't find any annoucements... Link to comment Share on other sites More sharing options...
FB Posted January 17, 2019 Share Posted January 17, 2019 Where do you see this information on Frontfour? Couldn't find any annoucements... www.sedi.ca (System for Electronic Disclosure by Insiders) Link to comment Share on other sites More sharing options...
FB Posted January 17, 2019 Share Posted January 17, 2019 I cannot explain this action... it's beyond bizarre. Years back, NTP CEO did this (early exercise of options slightly out of the money) due to ill-liquidity and obscene (mis)valuation of the shares... however, while I would agree that OBE is vastly cheap on an asset basis, and it's not "liquid" excercising >100% above price options without first trying to buy seems odd. Anyone have a (rationale) explanation? Trying to force cash into OBE for some reason? Trying to do something weird for taxes? Seems too far from the market to explain unless they contractually agreed to exercise when the price was higher... I don't get it. It looks like they exercised puts at 0.9 at the same time for the same amount as per the SEDI filings? So neutral from an economics standpoint? But that wouldn't explain this strange scheme. A possible explanation would be that they were in fact short puts and not long puts as the report suggests. Counterparty would have exercised their puts forcing FF to buy the 2M shares at the 0.9 strike. Link to comment Share on other sites More sharing options...
Pelagic Posted January 17, 2019 Share Posted January 17, 2019 I cannot explain this action... it's beyond bizarre. Years back, NTP CEO did this (early exercise of options slightly out of the money) due to ill-liquidity and obscene (mis)valuation of the shares... however, while I would agree that OBE is vastly cheap on an asset basis, and it's not "liquid" excercising >100% above price options without first trying to buy seems odd. Anyone have a (rationale) explanation? Trying to force cash into OBE for some reason? Trying to do something weird for taxes? Seems too far from the market to explain unless they contractually agreed to exercise when the price was higher... I don't get it. It looks like they exercised puts at 0.9 at the same time for the same amount as per the SEDI filings? So neutral from an economics standpoint? But that wouldn't explain this strange scheme. A possible explanation would be that they were in fact short puts and not long puts as the report suggests. Counterparty would have exercised their puts forcing FF to buy the 2M shares at the 0.9 strike. https://www.insidertracking.com/company?menu_tickersearch=OBE*CA%20||%20Obsidian%20Energy There's an exercise of a put option that matches a share allocation. -3,723 puts and an acquisition of 372,300 shares. Looks like in that instance they probably sold the $1 put and were put to when it was exercised with $.90 US being their reported cost basis after the premium collected. That line matches up. The larger acquisition of 2M shares doesn't show a matching put sale to go with it, but given the date listed being the same I'd be willing to guess that it could be. So really what we're looking at is them selling a bunch of puts on OBE and being put to as the price moved down, something they had no control over. Makes a lot more sense than exercising calls to buy at 2x the price of the common. Link to comment Share on other sites More sharing options...
FB Posted January 17, 2019 Share Posted January 17, 2019 I cannot explain this action... it's beyond bizarre. Years back, NTP CEO did this (early exercise of options slightly out of the money) due to ill-liquidity and obscene (mis)valuation of the shares... however, while I would agree that OBE is vastly cheap on an asset basis, and it's not "liquid" excercising >100% above price options without first trying to buy seems odd. Anyone have a (rationale) explanation? Trying to force cash into OBE for some reason? Trying to do something weird for taxes? Seems too far from the market to explain unless they contractually agreed to exercise when the price was higher... I don't get it. It looks like they exercised puts at 0.9 at the same time for the same amount as per the SEDI filings? So neutral from an economics standpoint? But that wouldn't explain this strange scheme. A possible explanation would be that they were in fact short puts and not long puts as the report suggests. Counterparty would have exercised their puts forcing FF to buy the 2M shares at the 0.9 strike. https://www.insidertracking.com/company?menu_tickersearch=OBE*CA%20||%20Obsidian%20Energy There's an exercise of a put option that matches a share allocation. -3,723 puts and an acquisition of 372,300 shares. Looks like in that instance they probably sold the $1 put and were put to when it was exercised with $.90 US being their reported cost basis after the premium collected. That line matches up. The larger acquisition of 2M shares doesn't show a matching put sale to go with it, but given the date listed being the same I'd be willing to guess that it could be. So really what we're looking at is them selling a bunch of puts on OBE and being put to as the price moved down, something they had no control over. Makes a lot more sense than exercising calls to buy at 2x the price of the common. On Sedi, you can actually see the matching puts for both the small batch and the larger 2M one (for 2 different pockets of FrontFour). They were most likely short puts indeed as opposed to long puts (the report is a bit confusing on that front) Link to comment Share on other sites More sharing options...
benhacker Posted January 17, 2019 Share Posted January 17, 2019 Thanks guys. God, every 3 months I'm reminded how much of an absolutely POS website Sedi is... it's really trying to be terrible. :) Link to comment Share on other sites More sharing options...
Joe689 Posted February 21, 2019 Share Posted February 21, 2019 Chairman resigns today abruptly. Just gets better and better over here. Link to comment Share on other sites More sharing options...
Liberty Posted February 21, 2019 Share Posted February 21, 2019 Chairman resigns today abruptly. Just gets better and better over here. Golf season is coming, he's got better things to do with his time. Link to comment Share on other sites More sharing options...
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