(This is not an actionable idea.)
Global Sources has announced its intention to tender for its shares at $10.00/share (press release). The shares currently trade at $7.93, well below the tender price. Global Sources has had two tender offers in the past. If history repeats itself, then the tender offer will be massively oversubscribed. Effectively, the tender offer will like a special dividend.
So why am I sitting this one out?
When oil and gas companies sell assets to each other in private transactions, they will often open a data room where the acquirer’s team of engineers can look at the data and perform their due diligence. I find it strange that supposedly sophisticated institutional investors are comfortable with oil and gas stocks without being able to perform this level of due diligence.
Maybe I’m crazy but I think that institutional investors are making huge mistakes in the oil and gas sector.
Either they’re wrong or I’m wrong. Time will tell.
I believe that there are currently very high levels of deceptive stock promotion and many opportunities for short selling. The nice thing about the current situation is that institutional investors are involved and are lending out their shares.
The website “Oil On My Shoes” contains a short and excellent introduction to petroleum geology. In particular, it explains how economic oil and gas reservoirs are often found in either structural or stratigraphic traps. What I took away from the website is that petroleum geology is quite complex. There are many factors that affect the exploration potential for a piece of land and therefore how much that land is worth. Just because two parcels of land are close to each other (what I would call “closeology”) doesn’t necessarily mean that wells drilled on both parcels will have similar economics.
Many publicly traded companies avoid disclosing information about geology and would like investors to focus on closeology. They want to trick investors into valuing acreage on the sale price of nearby land rather than the geologic potential of the land (or lack thereof). Without knowing the geological details, it’s hard to say if closeology is a reasonable shortcut in valuing acreage. At the end of the day, I think that it is a red flag whenever an oil/gas company tries to steer investors towards closeology. Usually it is an attempt to mislead.
I’m not a lawyer so please take what I say with a grain of salt. But here’s what I understand about the US legal system.
In my opinion, there continues to be opportunities in Liberty Media (LMCA/B). It is a wonderful business with excellent managers at a fair price.
LMCA closed today at $135.25.
Unfortunately, I’ve had a bad start in 2014. My long positions and my short positions are moving against me. I suppose that this is bound to happen because stocks are never perfectly correlated. (If they were perfectly correlated then there would be no point in trying to pick stocks or to profit from short selling.)
While I have a large number of short positions (30+), I have managed to find many stocks (mainly Chinese and solar stocks) that have quickly moved against me.
Short % of float: 5.4%
Cost of borrow: around 6%
Market cap: $91M
This stock is the intersection of:
