Caution To Trinseo Shorts - Closing The Barn Door After The Horses Are Already Gone

|
About: Trinseo S.A. (TSE), Includes: DOW
by: Prati Management
This article is exclusive for subscribers.
Prati Management
Long/short equity, value, special situations, contrarian
Summary

Trinseo short interest is up over 60% in the last two months to 5% of shares outstanding and ~8% of the actual float.

In simple math, we walk through how EBITDA will quadruple to $510 million in EBITDA from consensus in the current year trough of $125 million.

Morgan Stanley's downgrade May 28th, from Neutral to SELL after 6 years at "Neutral" appears years late, as it is based on a contraction in styrene spreads to marginal cost, which has already happened.

While having bounced slightly off the bottom, the stock is still down over 71% from the 2018 high and has underperformed the group significantly.

Our model and assumptions are already appropriately-conservative given the environment. We remain perplexed that short interest and negativity are increasing and how someone can sleep at night being short a stock with so much upside.

March to May 2020 - The COVID Impact, and a big "V"

What a year 2020 has been so far, and we are not even at the halfway mark. We have witnessed volatility in the