Is probably what Pictet are thinking. They started well, on February 25th 2020 declaring a huge borrowing of £4.4m of shares in Tullow in the very early days of the pandemonium. The price had already started to come down but I've assumed they did this for 51.94p. What's the problem you're thinking; it's only a little bit above that now.
So their next step was masterful; they bought back 90% of these shares at 11p, just 3 weeks later for 19% of the total original position. Ker ching! They've got "your" cash, well it must be someone's. Should they have bought that last 10% back they would have had a whopping £3.481m cosy profit. That's a million per week (albeit for an unlimited downside bet - can we really call this an investment?) At a push I would accept that it can be called insurance, although it makes me feel a bit more like in the movies where you see violent psychos collecting protection money so that nothing bad happens by accident you know.
Anyway, so they've got their protection money and are going to be back for the rest in another 3 weeks. However, they wait until the end of April, and decide that they will buy back the original position. This time at 22.5p. I think there might be a clue here; if you think something is overvalued at 52p, it's a lot less overvalued at half that. Of course if you think you can drive the business into the ground then you get to buy the shares back for pennies which will make your cat much fatter.
So the year keeps rolling on; the bad news keeps rolling in and Pictet borrow as many as 2.05% of Tullow shares. We've got this boss!! Although their position was now a much larger £9.6m; but they had all that original profit to tell stories about. Frankly they were probably becoming the office bore (albeit on Zoom).
Someone pointed out that the share price was going up, and as it reached 32p after a slightly worrysome Christmas and New Year they reached into their pocket and spent £870k buying back 10% of their position.
Then they bought back more on the 7th, 8th and 11th Jan. As the price started to rise into the 30's they were convinced that it would drop again and rebuilt their borrowings (although with less heart this time - just for show really) to 1.6%.
They haven't thought it wise to borrow any more since 23rd Feb when the price was 37p. Probably quite a good idea.
I'm sure they're telling the story of how they killed it last year with that short on Tullow though. The graph and spreadsheet tell a slightly different story.
I've added in a line at the end to show that it would cost them a cool £13.7m to close their position with a total loss across the whole position of £6.1m.
What would you do now if you were them? Do you think the oil price looks a bit toppy? Do you think Tullow will have any issue at all paying off its debt? Cripes; what if Tullow strike it lucky with their 1 in 3 chance of finding oil in Suriname in the next four weeks. The numbers for Tullow all stack up quite well IMHO without new exploration. It seems that the market is starting to agree.
They certainly look better for Tullow than Pictet.
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