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Josh Young

 
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  • GreenHunter - Even Management Recognizes Need For More Capital, But More Concerned With SeekingAlpha [View article]
    What modifications are you making? And why would you use that model in particular?

    I personally am extremely hesitant to trade based on "risk models". I didn't like them before 2008, and the 07-09 crash showed some of the challenges with modeling default risk.

    GRH has cumulative negative net income of just under ~$140 million since 2006 - not a promising start for a company that still has limited cash flows, ~$13 million in debt and $50 million of preferred (at face value).
    Oct 17 02:21 PM | Likes Like |Link to Comment
  • GreenHunter - Even Management Recognizes Need For More Capital, But More Concerned With SeekingAlpha [View article]
    Read the prospectus and GRH's 10-k and 10-q's...
    Oct 17 02:18 PM | Likes Like |Link to Comment
  • GreenHunter - Even Management Recognizes Need For More Capital, But More Concerned With SeekingAlpha [View article]
    The difference is that with GMX and ATP, they had large debt balances and small preferred issuance. The situation is reversed with Green Hunter. Preferred provides some flexibility to the company, but at the risk of potential loss to the preferred holder (and potential substantial loss to the common equity).

    A potential scenario is: financing does not go through, and Green Hunter's payables become overdue and dividend payments are due. Green Hunter could approach preferred holders and offer to exchange common stock at a discount for preferred stock. It appears this may have happened once already and may have been part of the reason the stock traded down previously, as those former preferred holders sold down their ownership of the common stock.

    This could happen (again) on a larger scale, and could potentially negatively affect the stock price even more. The stock is already down ~40% ytd despite a massive small cap stock market rally. It is hard to predict how much lower it may trade in such a scenario, but obviously I think the risk/reward/probabilities are in place for me to short the stock.
    Oct 17 01:57 PM | Likes Like |Link to Comment
  • GreenHunter - Even Management Recognizes Need For More Capital, But More Concerned With SeekingAlpha [View article]
    Tack, I'd be interested in seeing this "modified Merton model". Can you post it to a drop box and link it? It is obviously hard to comment or respond to something without seeing it. Other than the obvious issue that trailing operating cash flow does not seem to cover the dividend, which would imply a much higher than 1.6% chance of default.
    Oct 17 01:05 PM | Likes Like |Link to Comment
  • GreenHunter - Even Management Recognizes Need For More Capital, But More Concerned With SeekingAlpha [View article]
    I am not familiar with Quantum Online, but I am familiar with the actual terms of the preferred. A friend likes to say "people will do anything to avoid reading a 10-k" - I'd suggest using the company's filings as a source instead.

    Look at the GMXR preferreds. Those were probably the most similar - similar poor asset allocation and write down track record, similar negative working capital balance, etc. Those did not turn out well for the holders. Neither did the preferred for ATP.
    Oct 17 01:02 PM | Likes Like |Link to Comment
  • GreenHunter - Even Management Recognizes Need For More Capital, But More Concerned With SeekingAlpha [View article]
    Green Hunter looks like it needs to do a financing or asset sale in the near term to pay down the negative working capital balance and fund the preferred dividend. I don't think it will go bankrupt, but it is possible it will not have the capital to fund the preferred dividend, which could lead to large scale discounted conversion of preferred into common stock.

    I have to check my notes, but I think they may have previously converted some preferred into common, which may have explained one of the price drops in the stock in the last 18 months.
    Oct 17 12:21 PM | Likes Like |Link to Comment
  • GreenHunter - Even Management Recognizes Need For More Capital, But More Concerned With SeekingAlpha [View article]
    Tack, at over 14x Ebitda and with substantial negative working capital, and a need to raise substantial capital despite a track record of acquiring and then writing down assets, I am comfortable with my risk/reward being short the stock. Stock prices are to a large extent arbitrary - it would not matter much to me if the stock were at $1.35 or $135.
    Oct 17 12:01 PM | Likes Like |Link to Comment
  • GreenHunter - Even Management Recognizes Need For More Capital, But More Concerned With SeekingAlpha [View article]
    I think its remarkable that they responded. They should be focused on their massive negative working capital balance and on improving their poor track record of investing in and then writing off assets.

    The stock is still below my cost basis, despite having increased my short position recently.

    My understanding is the recent movement is related to aggressive stock promotion. But historically in this stock, such promotion has typically been followed by the stock falling - it is down ~40% so far this year despite a stock market rally and MHR almost doubling.
    Oct 17 11:58 AM | Likes Like |Link to Comment
  • GreenHunter - Even Management Recognizes Need For More Capital, But More Concerned With SeekingAlpha [View article]
    Is it a bad idea? Green Hunter traded at $25 at one point and is now at $1.35. Looks like it has been a good idea not to own GRH since inception. And the stock is down 40% ytd, despite a 75% increase in MHR.

    I have never said that Mr Evans is a fraud. I have a lot of respect for the work he is doing at Magnum Hunter, despite potential conflicts of interest with the dual role at Green Hunter (potential issues with use of a corporate jet, buying an expensive MAG tank vs cheaper options...). I think the preferred issuance at Magnum Hunter was brilliant and have convinced other companies to follow in MHR's footsteps (it has worked quite well for Gastar).

    But Green Hunter is simply not performing, and with the huge amount of debt and preferred relative to the amount of book value and the performance of the assets, there may not be much remaining equity value, and book value may be too aggressive (as evidenced by the failed asset sales mentioned in the article)
    Oct 17 10:57 AM | 1 Like Like |Link to Comment
  • GreenHunter - Even Management Recognizes Need For More Capital, But More Concerned With SeekingAlpha [View article]
    I discussed relative valuation in the article. Key is an example of a company in some of the same business lines as GRH but trading for ~1/2 the EV/EBITDA multiple
    Oct 17 10:51 AM | Likes Like |Link to Comment
  • Peter Schiff's Euro Pacific Capital Thinks Lucas Energy Is Worth $3 Per Share [View article]
    Bankstocks, I have never recommended the stock. This is an important distinction. I have explained why I owned it and pointed out interesting, positive attributes, such as Ironman investing millions of dollars in it or Euro Pacific initiating coverage with a $3 price target.

    I don't want to quote an imprecise value, and since I was going to have to look it up, and then show it to you, and then (in theory) you would look it up to double check, I suggested you skip those middle two steps. Also, the focus of this article was on the new research coverage, which attributes little value to that eastern acreage.
    Oct 15 01:29 PM | 1 Like Like |Link to Comment
  • Peter Schiff's Euro Pacific Capital Thinks Lucas Energy Is Worth $3 Per Share [View article]
    Black Gold, Lucas is an asset-oriented company in the midst of a turnaround. It has already made tremendous progress, but it does not yet make sense to evaluate Lucas based on historical financial metrics. There is value in oil fields even when they are not yet producing substantial quantities of oil.
    Oct 14 08:25 PM | Likes Like |Link to Comment
  • Peter Schiff's Euro Pacific Capital Thinks Lucas Energy Is Worth $3 Per Share [View article]
    Bankstocks, please refer to Lucas's 10-k for precise answers to your questions. That is where I would go, and it would save us both a step.
    Oct 14 08:20 PM | Likes Like |Link to Comment
  • Peter Schiff's Euro Pacific Capital Thinks Lucas Energy Is Worth $3 Per Share [View article]
    Mr. Musante's previous firm did business with Brigham; his track record speaks for itself. If he didn't want to cover Lucas, he wouldn't be covering Lucas. I've seen sell side analysts decline covering stocks of small companies after small equity deals and it has only helped their career.

    What is your track record? I don't think you've even disclosed your name. I've never seen so many negative articles about a micro cap company by someone who was actually not short the stock. It does beg the question of what your economic interest is...

    It seems like you're becoming increasingly negative as Lucas checks off the boxes - lines up financing, stabilizes production, starts drilling new wells, gets analyst coverage...

    Austin Chalk and Buda wells in Lucas's area have been highly productive historically. And Lucas's CEO has a good track record of turning around E&P companies like Lucas, drilling wells like the wells the company is currently drilling and doing financings like the financings Lucas just did.
    Oct 14 08:19 PM | Likes Like |Link to Comment
  • Peter Schiff's Euro Pacific Capital Thinks Lucas Energy Is Worth $3 Per Share [View article]
    Thank you for the question. I think one could have asked that about the performance of a number of stocks immediately before Mr. Musante initiated on them. BEXP was down over 90% in the previous year, and then traded up over 3600% over two years. Similar story for other stocks, albeit with less extreme returns. Small caps underperform for various reasons and outperform for various reasons.
    Oct 14 11:06 AM | 1 Like Like |Link to Comment
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