Transformational deals equals lousy performanceI’ve owned a position in this stock for over three years. As the charts show, SOIL was taking off along with other energy names until the CEO, John Jeffrey, started doing what he likes to call “transformational deals." Since then, the stock’s performance has been abysmal. The CEO appears to be more focused on empire-building by playing chechers not chess, which is dangerous in the commodities game, which none of us can control or handicap and where we’ve seen fortunes lost.
While Jeffrey and his cronies stand to gain from all this, shareholders are left holding a poor investment. Meanwhile, bankers keep stroking Jeffrey’s ego to do the next deal – to get their next commission – and analysts back this up by continuing to push out lofty targets for a stock that languishes.
Many energy companies today are divesting because there is a new business model based on paying down debt and rewarding shareholders, yet SOIL seems intent on doing “transformational deals” and building its empire by taking on expensive debt and issuing cheap shares. There are few institutional buyers around and Eric Nuttal has stated he is only interested in owning Companies that fit the new business model that he is fighting for - we do not fit.
If SOIL does the right thing by not doing more transformational deal and pays down its debt, it may look good enough to attract new shareholders. If this happens maybe the next deal in a year or so should be at premium or at least an up-round and we get the wheel turning and the chart going in our direction - up and to the right. As owners of the company, we need to make our voices heard. More importantly, as CEO, John Jeffrey (
jjeffrey@saturnoil.com) needs to listen.