Entering text into the input field will update the search result below

Revisiting Camber Energy: The Situation Still Looks Bad And I Continue To Be Bearish

Dec. 03, 2021 7:02 PM ETCamber Energy, Inc. (CEI) Stock30 Comments


  • The company’s share count has hit 250 million and is likely to increase further due to the conversion of Series C preferred shares.
  • Its main subsidiary posted weak results for Q3 2021 and it transferred most of its oil and gas business in October.
  • With that, the main assets left include a 60.5% stake in Simson-Maxwell and an IP license agreement for a carbon capture system that covers Canada.
  • I doubt those two are worth much and I’m still bearish.

Brown bear face contour in black and white. Bear face on black background.

ErikMandre/iStock via Getty Images

Investment thesis

So far in 2021, I’ve written bearish SA articles on more than 30 companies that seem to have attracted significant retail investor interest. The share prices of the vast majority of them have declined as

This article was written by

Gold Panda profile picture

Gold Panda has been working as an M&A analyst for over 11 years. He's been investing since 2007. Preferring value to growth, he tends to take a relatively conservative approach in his investing. His focus is on small and micro-cap stocks, which he believes is the area which offers the greatest opportunity to exploit market mis-pricings.

Gold Panda is part of the team that runs the investing group Microcap Review. He provides a real-time portfolio to the group. Microcap Review focuses on three areas of opportunity in the micro-cap space: arbitrage and special situations, net-nets and undervalued stocks. Learn more.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am not a financial adviser. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (30)

Gold Panda profile picture
wow, what a spike today
Platypussy profile picture
@Gold Panda A fool's rally to be sure. Memesters have no clue as to how the value of the company depends on not just price but the number of shares.

If CEI ever files earnings reports again (going unreported for nearly two years now!) they'll have to disclose how many shares they've issued are since they raised the cap from 250M to 1B.
Xxfactor profile picture
Why haven't they filed earnings in 3 quarters? That's a huge red flag. Do they have an excuse?
charly333 profile picture
CEI is a phenomenon. The stock dropped from $ 102 million in 2011 to $ 0.77 today and the price is still too high. Any buyers had good marks in math?
Dilution is the name of the game and it will continue as long as there are clueless buyers.
charly333 profile picture
@Gold Panda There's nothing like the stock market.
Gold Panda profile picture
@charly333 well, there are casinos

“A man can choose different ways to get rid of his fortune: the fastest is the casino, the most pleasurable is with beautiful women and the most stupid is at the stock exchange.” - André Kostolany
Platypussy profile picture
Digging a bit deeper into the weeds it turns out that following a 'Trigger Event', which is what happened after they failed to file reports with the SEC, the default conversion rate of their $20M in preferred shares becomes 85% of the stock price - minus 10c - of the 5 lowest days of the preceding 60 trading days to a conversion request. This price is subject to adjustment lower per the 60 succeeding trading days too!!

If for example one were to look at the 60 days leading up to Friday, Dec 4th, the 5 lowest days add up to about 5.20.

5.20/5 = 1.04 x 85% = .86c - 10c = 76c shares.

But the kicker is that those shares have to be sold as soon as they're converted to keep the lenders within the 9.9% ownership limits. As those shares get sold into the market they further depress the price which causes Camber to have to issue additional shares under the 60 days look-forward provision. That means more shares get issued in a revolving door of greater and greater numbers as the price goes lower.

The only limit is the lowest price on conversions has been set at 1c.

This is why they're called 'death-spiral' convertibles.

Platypussy profile picture
@Platypussy Per the formula described above if one preferred share equals $10,000, at 76c that would convert into 13,150 shares. But if the 5 lowest day's ave in Dec and Jan is 75c, then Camber would have to go back and adjust the previous issue from 76c to 54c, which would result in increasing the number of shares issued to 18,520. That gives the lender an additional 5,362 shares to sell.

(.75 x 85% - 10c = .54c)

(10,000/.54 = 18,520 - 13,150 = 5,362 shares)

Of course what this doesn't include is the interest which is now running at 25% a year. The longer this lack-of-share delay continues the more shares this adds to the mountain.

All in all the stars aren't looking good for CEI!
kbaba profile picture
@Platypussy I recall there's something of a penalty rate of 35% under certain circumstance possible for the preferreds although I won't swear to it. Basically, if the company doesn't file all the reports tomorrow they'll be more in default to recent agreements. All the defaults will give the preferreds leverage to ask for whatever they want that won't fully kill the company in exchange for not calling the company out for breach of contract
Platypussy profile picture
@kbaba To a degree it's reminiscent of the saying, 'if you owe the bank $10,000 you can't pay you have a problem. If you owe them $10,000,000, they have a problem'

One way or the other they will get either a massive windfall from their loans by converting to shares or they only get a mere windfall by taking possession of Camber and Viking's assets such as they are in liquidation.
Only time will tell. Another acquisition coming next week. Enjoy your short position
kbaba profile picture
@jbsteelers716 The 'Conditional acquisition" Doris tweeted of was undoubtedly the Reno biodiesel plant which is conditional on Viking getting financing for it.


from the CEI press release December 2nd
"...Viking's obligation to close the transaction is conditional on a number of items set out in the Membership Interest Purchase Agreement, including, without limitation Viking having obtained financing, on terms and conditions satisfactory to Viking in its sole discretion. There is no guaranty the conditions will be satisfied."
charly333 profile picture
It seems CEI will see endless dilution. Then they could do a reverse split and so on. I would not touch this at any price.
kbaba profile picture
Glad for this article as there's not much discussion of CEI on SA. Indeed, the preferreds are the devil in the details. In the 14a SEC filing of November 29th, the company stated

"To the extent that additional authorized shares are issued in the future, they may decrease the existing stockholders’ percentage equity ownership and, depending on the price at which they are issued, could be dilutive to the existing stockholders. It is currently anticipated that a substantial portion of the additional 1,000,000,000 shares of authorized but unissued shares of common stock which will be made available through the increase in authorized shares of common stock will be issued in connection with the conversion of all or a portion of the 3,886 outstanding shares of Series C Preferred Stock, pursuant to the terms of the Series C Preferred Stock.

The 3,886 outstanding shares of Series C Preferred Stock are potentially convertible into approximately 498,564,677 shares of common stock, subject to a 9.99% beneficial ownership limitation and further adjustment as provided in the designation of such Series C Preferred Stock. As a result, future conversions of the Series C Preferred Stock would likely cause substantial dilution to existing stockholders."

So of the 750 million more shares the company wants 500 million of them are reserved for the preferred which MUST keep selling the shares they get to avoid the 9.99% ownership limitation that would cut them off from getting shares as dividends.

The company in that same filing reveals they have zero shares left in their treasury and the James Doris and the executive staff DON'T OWN A SINGLE SHARE between them!

That's grim when the Viking Merger is transacted one for one with CEI shares. Viking as about 100 million shares outstanding and contains all the significant CEI assets. So the Preferred and Viking accounts for 600 million of the 750 million shares they are asking for.

The company filed that they want to acquire a biodiesel plant under construction in Reno for 8 million$ and some preferred shares and there's mention of a "Viking bond" estimated between 250 and 275 million but really, financing seems very unclear. Similar Biodiesel plants of that size were turning a profit of about $1,250,000 million a year but much depends on diesel and veg/soy oil prices.

To avoid being called into default by the preferred after the company ran out of shares, the company made significant concessions to them as detailed in recent 8k filings. The preferreds got voting rights equalling 62 million shares, and the company can no longer end them early. There are stipulations in the agreement about that the company must get their delinquent filings in by Dec 6th (soon!) and get share authorization done by Dec 31st (company cutting it close)

Shareholders commonly saying they will vote no on the dilution without considering that would defeat the Merger and continue the default with the preferred. Might be doubtful the preferred would push the company into bankruptcy as that would kill the goose laying golden eggs but I remember something about a 34% penalty rate.

None of this is new to the company whose split adjusted share price on April 1st, 2011 was well over 70 million dollars per share. (there is a historical price calculator in the investor section of Camber's website) it's a miracle this company has never been bankrupt but, if shareholders deny the dilution, there might be a first time. Pick your poison, this company is very troubled but followers of Zach Morris hear "Carbon Capture, High Oil Prices, Generate clean electricity for Crypto mining" and think its the next Tesla. It's sad they will be led to slaughter I think
kbaba profile picture
@kbaba Seems to be an error is the filing I quoted, They wrote

"It is currently anticipated that a substantial portion of the additional 1,000,000,000 shares of authorized but unissued shares of common stock which will be made available through the increase in authorized shares of common stock will be issued in connection with the conversion of all or a portion of the 3,886 outstanding shares of Series C Preferred Stock"

But they are "only" asking for 750 million more shares and the 250 million they have are issued, so where is the question of "additional 1,000,000,000 shares of authorized but unissued shares of common stock" Seems like an error. No wonder they are in trouble with their filings

Note, it was only in april 2020 that the company went from 1.5 million authorized shares to 25 million authorized shares. 1.5 million to one billion shares within two years! Here is the history

"Effective on December 24, 2018, ...affected a 1-for-25 reverse stock split of the Company’s

Additionally, ....July 1, 2018, a 1-for-25 reverse stock split of the Company’s issued and outstanding shares of common stock, which went effective on July 8, 2019.

On October 28, 2019.... a 1-for-50 reverse stock split of the Company’s (a) authorized shares of common stock (from 250,000,000 shares to 5,000,000 shares); and (b) issued and outstanding shares of common stock. The reverse stock split was effective on October 29, 2019”…

and it was only after all those reverse splits that this happened

"Effective on April 17, 2020, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada to increase its authorized shares of common stock to 25 million shares of common stock.

Effective February 23, 2021, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada to increase its authorized shares of common stock to 250 million shares of common stock.""
Platypussy profile picture
@kbaba Nice work, I think it's time to publish an addendum!

It seems to me that if the debt holders get 62M votes the proxy is very likely to be approved. Yes it leaves 188M other votes but honestly how many times have you, has anyone, voted in these proxies? Not often I'd guess and I'd expect even less attention to details like voting from the 'apes'.

You might as well expect them to crack a 10-Q, ha!
kbaba profile picture
@Platypussy Here's the thing, there are two different rules for voting on proposal one and proposal two. They need a majority of ALL outstanding shares to get the authorization and lack of people voting (as you pointed out) means it could easily fail. Company will really have to rally shareholders to vote this in or perhaps crash and burn if they fail.

From the November 29th 14a

"Q: What vote is required to approve each item?

A: The following table sets forth the voting requirement with respect to each of the Proposals:

Proposal 1 – Approval of the filing of an amendment to the Company’s Articles of Incorporation to increase the number of our authorized shares of common stock from 250,000,000 to 1,000,000,000.

To be approved by stockholders, this Proposal must receive the affirmative “FOR” vote of the holders of a majority of the shares outstanding, and entitled to vote.

Proposal 2 –Approval to adjourn the Special Meeting to another place, or a later date or dates, if necessary or appropriate, to solicit additional proxies in favor of the Proposal listed above at the time of the Special Meeting.

To be approved by stockholders, this Proposal must receive the affirmative “FOR” vote of the holders of a majority of shares represented at the meeting, in person (including virtually) or by proxy, and entitled to vote."
Right on. Made the same assumption with less analysis before exiting a small position. Can’t say never again, but the valuations you give, I believe, are spot on.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About CEI

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on CEI

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.