Skip to main content

Varde borrows 2.5% of Tullow and starts well.

 It seems that the changing tides of the oil market have caught our borrowers in their burrows. Looking at the reported borrowings of Varde Partners these Swedish vikings look like they have been caught and are surrounded. (apparently Varde means value in Swedish). Anyway, Värdeförlust Partners Europe Ltd seem to have had a fun time early in 2020.

The story begins as they borrowed 2.5% of Tullow's shares and reported this on 11 March 2020. In the couple of weeks before, the share price was between 34p and 11p. I'm going to be generous and assume that they averaged their position in (or out) at 25p. As such they were credited with a whopping £8.8m of  your money.

They then wisely bought back nearly half of this position (1.22%) for just £1.5m. Rolig !

Now the difficulties start. They continued to extend their borrowings all the way up to 2.85% of the company. This was done in the 20-30p range and even finally at 34p back in June '20. They're now in for a cool £12.4m of their investors money. (well actually it's an unlimited downside)

So we see...the penny seemed to drop last month as it cost them £1.5m to buy back just 11% of their borrowings. Remember; just 11 months earlier they had been able to masterfully buy back 3.8 times this number of shares for less money!! Skit

Let's look at the data in more detail. I've added a line in at the bottom which assumes that they could buy back all of their remaining borrowings at 55p. I doubt that somehow. 


And here's the graph. Looking a bit eye watering.. I wonder if their investors know that they've got potential losses of £8.6m and counting on this "can't lose" position?



Please do your own research. I own shares in Tullow Oil, as I think they will go up in price. Generally speaking that's what happens when the oil price behaves as it is. If you find yourself in a burrow still with a debt based on 33.5m Tullow Oil shares that you owe make sure that you do your own research into a sturdy pair of kalsonger as the roller coaster is just beginning. The first rule of investing; never borrow to invest as you've got to pay it back. 

Labels

Labels:

Comments

Post a Comment

Popular posts from this blog

Metro Bank comparing new share price with old price - post 75m new shares

I wasn't actively tracking Metro Bank, but had been aware of the story these past few weeks. Over the weekend I started reading up about them. The close on Thursday was 536p trading up on Friday to close at 669p up 24.8%. As I write today they're up about 10% at 772p (It also was at 782p whilst working out some of the numbers below) The cash raise was priced at 500p a 36p discount to closing price on Thursday They wanted to raise £350m but actually raised £375m issuing 75m new shares. The BBC wrote about the crisis on 19th March '19 when the share price was 850p, it had dropped from 3396p on 27 July '18 (75% drop) Metro has debt of £249m Here's some high level analysis to translate old money into new money (partly as Google haven't updated the total voting rights (TVR) yet). 27th July '18 company valuation was Marcap £3,308,398,753 2nd May '19 TVR was 97,420,458 and Share price 650p Marcap £633,232,977 Share price at 500p Marcap £487,102...
2 comments
Read more

Short Hare vs Tullow Tortoise

Well that's a bit contrived but we are in a race; it's the shorts against the longs. The shorts want the Tullow price to go to 1p or less and the longs 100p or more. Where are we at the moment? Somewhere in the middle at 45p. There are actually at least 5 hares in this particular race; Odey, Pictet, Varde, Whitebox and Key Group. Key Group are flagging a bit and have dropped to 0.49% or less which means that they don't have to report anymore. Odey and Pictet seem convinced of victory and have raised their stake in the last week of February. Varde has decided they're too far ahead and have repaid 0.32% of the company value on 19 Feb. I expect they're very pleased with themselves as that cost just £1.54m on 19 Feb and would cost £2.06m in todays money 11 days later. So why do investment managers short stock? Broadly speaking it's for two reasons, the first is that they've gone through a discounted cash flow based valuation and looked at any other factors such ...
Post a Comment
Read more

Learning more about IOG

 As a relatively recent investor in IOG, I thought I would write up some of my research whilst waiting for that update about first gas. From the website "IOG is focussed on the Southern North Sea (SNS) with a fully-funded Saturn Banks Project consisting of a 50% operated stake in six proven gas discoveries plus the Saturn Banks Pipeline and onshore Saturn Banks Reception Facilities at the Bacton Gas Terminal." Bacton is in Norfolk and we own both the facilities there and a concrete pipeline to get there. We farmed out most of the other 50% to an Australian firm called CalEnergy in 2019 according to this article . They paid £40m upfront and will pay up to £125m in development costs. At the same time we launched a bond to raise aprox £70m. At the end of Feb 2020 as the first incling of the potential for a pandemic arose CalEnergy declined to spend a further £20m buying half of our stake in the Harvey and Redwell licences according to this article . At this point, the price per ...
Post a Comment
Read more