Mystery surrounds huge trading in OPTI stock
Rocketred
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2006-03-19 - 09:47:46
Mystery surrounds huge trading in OPTI stock
Carrie Tait, Financial Post
Published: Tuesday, May 12, 2009
OPTI Canada Inc.'s (OPC/TSX) trading volumes have gone berserk this year, with its stock turning over at astounding rates.
The company is not in play, and with what some consider a built-in poison pill, buying it on the cheap would be tricky. So why OPTI has become a traders' playground is a bit of a free-market mystery.
As of Monday, for example, it took traders only 13 days to turn over all of OPTI's 196 million shares outstanding. Further, it took only three days for the float -- it knocks out the 50% of the stock estimated to be in the hands of people not inclined to trading -- to turn over.
William Lacey, an analyst at FirstEnergy Capital Corp. has been poring over OPTI's trading data and calculated its turnover rate. He picked over OPTI's operational data -- production volumes, productivity of its wells, progress on its oil sands project and other factors -- just to make sure he wasn't missing something. Mr. Lacey, like others, came up blank.
"I'm totally flummoxed as to the trading pattern with the stock," he said in an interview. "It just doesn't make sense to me."
Generic suggestions that OPTI, which owns a 35% stake in the Long Lake oil sands project, is a potential takeover target don't quite explain away the frantic activity. The company's debt has a change-of-control clause that would dramatically add to the price of a takeover.
OPTI has US$1.75-billion in high-yield bonds outstanding, and any potential buyer would have to take out those bonds and cough up an additional 1.01% premium. With OPTI's bonds trading around US60¢ on the dollar, bondholders would receive an extra US41¢ for every dollar in bonds held, notes Alison Trollope, a spokesperson for the company.
(A potential suitor, however, could get around this problem by buying the bonds on the open market before bidding).
Even if a company -- say, Total SA -- was stalking OPTI, the trading volume still seems excessive. After Total launched its bid for UTS Energy Corp. in late January, traders did not eat through the target company's stock with nearly the same enthusiasm.
OPTI itself is confused as to why its stock is moving so unusually. "We've asked the same question and we've really had no definitive answers as to why," Ms. Trollope said.
The company, she said, consulted with traders and analysts as it tried to solve OPTI's trading mystery.
Perhaps there's optimism about a takeover-on-the-sly attempt based on a presentation Nexen Inc. CEO Marvin Romanow delivered in New York March 16. According to a hedge fund trader who was in the audience, Mr. Romanow indicated he wasn't interested in buying OPTI outright -- the bonds served as a deterrent -- but he would be happy to opportunistically buy slices of the company.
Nexen, for example, bought 15% of the Long Lake project from OPTI in January for $735-million, increasing its stake in the oil sands development to 65%.
And so without any changes to OPTI's operations, and no clear takeover in the works, analysts are downgrading the stock. Mr. Lacey downgraded the company to 'underperform' based on its current valuations, while National Bank Financial's Peter Ogden knocked it down to the same level.