Prediction #1: BP stock price will continue declining to at least below $15/share if not lower in the next few months if not weeks as BP will need to defend itself heavily againts regulators, environmentalits, costs of the oil-spill and short-seller. All combined is a significant downside pressure to BP stock and business operations.
Reason: Fear of holding BP will likely escalate to ridiculous level as there will likely still be no effective solutions to the oil spill. As such, shortsellers will continue actively increasing their short positions in BP as there are and will likely be no catalysts for sustainable rebound.
Prediction #2: BP oil spill will cause market prices of oil-related companies in the energy sector to continue declining poitentially for at least a year.
Reason: Institutional investors and traders will likiely modify their risk parameters for the energy sector to include: a. higher level of oil spill costs and political backlash risks reducing fair valuation of many oil-related companies, and b. reduction of asset allocation in the energy sector.
Prediction #3: BP CEO Tony Hayward will resign (or fired) in shame within the next 3 months. He will be replaced by insider who 'appears' to know how to handle mounting oil spill costs, regulatory and environmental issues.
Reason: President Obama very clearly wanted Mr. Hayward to be fired; and, BP shareholders will likely pressure Mr. Hayward to resign or else...be fired by BP boards.
Prediction #4: BP oil spill will not have any effective solutions anytime soon until early 2011 or longer.
Reason: Whatever solutions that have been implemented, are not working effectively. There is no solutions to contain the massive oil spill.
Prediction #5: BP are and will face many lawsuits and regulatory fines costing at least $40 billion excluding the costs of oil spill containment (if any.) and therefore, now more than even, BP could potentially be forced to file bankruptcy within a year to protect itself from expensive lawsuit after lawsuit and inability to raise significant amount of capital.
Reason: Investors and traders are currently underestimating the total costs of the current massive oil spill. Therefore, sooner or later, BP will likely face even more difficult choices not only to contain the oil spill but to raise large amounts of capital to finance the escalating oil spill costs (but who want to finance it???)....and finally, the boards and management will likely be forced to think the unthinkable: strategic bankruptcy. Bye bye current BP shareholders. Bye bye lawsuits. One thing will remain: the management team and the boards are and will still get paid handsomely.
Note: This article was originally posted at DeepValueTrader.com
Disclosure: No positions at the time of the writing.