Understanding BlackRock and why it's time to average down. I was able to get gather some insight into the BlackRock situation and it's potential impact on the Strategic Review process. I have to say it's the best news I've heard about TMAC in a long time and has given me the confidence to average down even more.
TMAC is 110% aware of the BlackRock selling and are equally frustrated by it - it's been a topic of multiple discussions at the board level. Because this particular BlackRock fund is based in the UK they cannot do a large block trade to get rid of the selling (MIFID rules) - unfortunately it has to be sold piecemeal through retail channels.
From BlackRock's perspective, the TMAC investments is really just a rounding error and they don't care about the small loss. A new fund manager has made a philosophical decision to exit this class of investments. The current estimate is that there are about 7M of their 14.5M shares left to sell and it will probably take several more months to chew through them. Because TMAC is undergoing their strategic review process, they are all (management, board & current investment funds) in BLACKOUT and they cannot fight this selling by buying shares. So they just have to ride it out like everyone else.
I say again, the selling has nothing do with TMAC's current situation, but with a single fund manager in the UK deciding they want out of this asset class. Unfortunately, it has created sort of a perfect storm for the stock and the timing is awful. TMAC's management interests and angst are clearly aligned with us lowly retail investors.
In you check out their investor presentations, in early 2019 something similar happened with another smaller fund which forced a decline in the stock. Once the selling was over, the stock rebounded.
Their Y/E is coming out in early March and they will be providing production numbers for Jan and possibly Feb. My 'sense' was that everything was relatively positive and production numbers are improving. I believe it will be a blow-out quarter.
I contacted TMAC's IR to ask the critical question: How is this current stock price is going to impact the ongoing "Strategic Review" discussions? As a fund raise or acquisition at this price would be devastatingly dilutive for current investors? It was reassuring to be told that all of the interested parties are aware of BlackRock's sell off. According to TMAC's IR, the current stock price will NOT be a factor in the valuation. All valuations are being done on the asset and potential, the current stock price is IRRELEVANT.
My thinking is that with the lower price the volume of BlackRock share selling might accelerate as the lower price will buy more shares (i.e. $1M of buying will by 500K shares at $2 compared to only 250K shares at $4). If this increases to 1.5M/shares a month we may only have a few more months to go. We need about $15M of buying to take out BlackRock (~7M shares @ ~$2/share).
Despite TMAC's numerous missteps the underlying rationale for investing in this company remains sound. If they can pull off a record 1Q20 with this Blackrock selling wrapping up I would expect the stock to return to the pre-BlackRock selling level of ~$7 and perhaps higher if they can pull off a couple of quarters without stepping, once again, on the proverbial rake.
Good luck to all longs.