Still chirping away over the carcass of “the offer” are we?It’s over; get over it. The offer was dead in the Fall; it was dead at the end of the year; and it is more than dead now.
And it shows in the chirps:
- Share price comparisons equating to a premium to Bonterra shareholders by tendering their shares? Very low volumes in both companies. Have a look at the short trade over the past couple of months: what trading that is happening (an internal cross notwithstanding) is day trading and short covering (and churning). At mid Feb there were over a million shares of OBE shorted, even as 127K had been covered during that time. The end month report shows continued high short selling; it will be a couple more days before we know how much covering there was, but my guess is that both the minor uptick in the emaciated volume and the similarly miniscule rise in price might be explained by this. Or there are other theories about market manipulation, by foreign interests seeking to deny Canadian companies capital, or exploit the low volumes in squeezes, which could be at play here although given the buoyancy that commodity prices are showing, these may be hard to sustain if they are factors at all.
- Likewise the idea that this is a “liquidity event”? OBE’s offer was predicated on the thesis that BNE’s shareholders were looking to exit. Well, it appears that this was a bad assumption, and more mirror imaging than real – it is OBE shareholders who seem focused on an “exit”, not BNE’s. The point to be taken from BNE’s low volume is that few seem to want to sell at the “price” that OBE has offered. Part of that is different takes of the value of the shares; but I suggest that more of it is different values held by the shareholders themselves.
Not that a no-cash share exchange into a company with Obsidian’s record is really a “price”. Or that there is any reason to think that doubling the number of OBE shares would suddenly spike either price or volume; and what do you think would happen to the price if any large holder were to try and exit in this market? And, of course, “the offer” is a very convoluted, which would leave those who tendered in limbo while all the other conditions were met. Where would they be if the deal faltered and/or failed?
- Leadership? The last press release on this from Obsidian, on 5 Jan 2021, said that “... Mr. Loukas’ employment contract has been extended through the end of January 2021 to allow for the Board to negotiate a longer-term extension.” Nothing since; so who is in charge there today?
Now the comments from our resident OBE posters on Mr Loukas are “lacks experience in O&G” and “looking for a new CEO”. How is this supposed to appeal to anyone looking at a potential business combination?
- Financing? Obsidian is living month-to-month on its restricted bank line; now bumped out another 30 days. Does anyone have any idea on what the draw is today? It is easy to assume that with current prices cash flow is balancing out capex, but Obsidian carries a lot of PennWest baggage, so what is really going on?
The speculation about “offering a heck of premium” to “make a play” for alternatives to the offer to Bonterra only highlights that Obsidian is in no position to offer anything to anyone. How it ever got a sign-off for the share exchange deal; and even that at a huge discount, is a great question, as this is costing the shareholders real money to sustain. Where does it propose to get the capital to do the work that would produce the magical efficiencies it claims could be achieved? And, as Bonterra is already clearly the far more efficient producer, how does a takeover achieve these? Look up the G&A expenses of both companies and then ask Obsidian how any combination, particularly one done under Obsidian’s direction, could possibly come up with the economies predicted.
I am not thrilled by Bonterra taking the EDC/BDC loans (with their restrictions) either, but it had to be done and gives Bonterra a clear path forward as commodity prices rebound. A better question, given where Obsidian is now, is why Obsidian did not apply for these. This is the real question, as the approval process would have involved a hard look at the books and certification that the company was a “going concern”. Could it have qualified?
So explain to me again why anyone would want to combine with Obsidian.
Or better yet: Don’t. The chirping has become quite irritating and my gall bladder is complaining.
Go see if you can convince the Obsidian board (nothing else there; just like there is no analyst coverage of the company) that Obsidian has a future, and what that might be, and cease bothering us here.