The confusing ways the market values a stock Here is what I can not understand, having owned all CGX to start, then understanding the complex ownership etc.and going 50% each FEC/CGX. then converting more FEC to CGX since Catalyst is going to make their money on the price they get for selling FEC and not selling their CGX shares. Correct me if I am wrong here. Catalyst owns about 42% of FEC and their #2 guy is Chair of FEC and co Chair of CGX. FEC owns about 76% of CGX so completely controls it and calls it a subsidiary.
FEC now owns 72.7% of the C block concession outright, leaving 27.3% of the concession to CGX, however with FEC owning 76% of CGX shares that would mean FEC indirectly owns 76% of CGX's 27.3%, Right? Thus leaving only about 6% of the C block remaining outright for CGX? Am I correct on this? If you own 76% of a company, you own 76% of all of their assets?
So let's take this a step or 2 further out. FEC, a +/- 8U$ stock earned $1.93 a share last year from O and G,and its midstream biz. CGX earned nothing. FEC's midstream business consists of a very large and growing strategicly located modern Port and various pipelines that was recently set up to be a stand alone sale by Catalyst as Frontera Midstream.
Frontera Colombia-Ecuador is producing over 40kboe/d and without any share buybacks, dividends to pay, or deep water wells to finance, should show very nice free cash flow for the remainder of the year. It also has been set up to sell as a stand alone sale by Catalyst. So, there are multiple ways that Catalyst can sell off FEC, the quickest and fastest would be sell the entire company intact. Currently the market says the entire company is worth $659Mil US.
When compared to CGX who also has to add the dreaded "going concern" warning to their financials and directly controling only about 6% of the C block concesson, why would the market be valuing them at $257Mil or about 40% of FEC's market value? This is where I am confused, as it surely seems that the two companies should be trading at far larger multiples apart. Do you think it is because the market is unaware of the CC control and ownership of FEC plus the FEC control and ownership of CGX and that CC is surely trying to sell FEC by setting it up to sell in pieces back in April. There was no other reason to suddenly do that.
If it was announced today that FEC intact had a binding offer for Sporty's very rough guesstimate of $3Bil and that included leaving CGX as a going concern but passing the CGX shares to the new owner to keep CGX as a publicly traded subsidiary, and likely for other good business reasons... what would determine the value of the CGX shares after this potential announcement was made? That is also very confusing. Can someone explain their thoughts on this?
And why there is not a larger price differential between the two companies?
| Security Type | Equity |
| Shares Issued | 85,189,000 * |
| Market Cap | 659,363,000 * |
| Year High | 10.66 |
| Year Low | 6.55 |
| Beta | 6.3602 |
| Annual Earnings/Share | 1.963 |
| P/E Ratio | 3.942945 |
| Security Type | Equity |
| Shares Issued | 338,549,000 * |
| Market Cap | 257,297,000 * |
| Year High | 1.45 |
| Year Low | 0.6516 |
| Beta | 0.9161 |
| Annual Earnings/Share | -0.02 |
| P/E Ratio | -38.00 |