Baytex: Share Price Resistance All,
We have had ample time to digest the merger. Current share price is why I am not pleased with it. Shareholder dividends are nice, though they remain “minuscule dumpster-diver scraps” compared to the “Spice” the banksters are receiving on the Senior Notes. More Pepto-Bizmol, please.
The problem in share price is due to those who are in control of the stock. Bashers and bulls alike, can agree, there are too many shares. Unless you have certificates in hand, your shares are in the street name. Without a specific agreement with your broker, those shares in the street name, and any other shares not held by institutions, can be loaned, and shorted at will. (plus naked shorting) The duration is never long enough to show up on reports, that people like us have access to. The result is share price control, by market makers and other institutions. (The repeal of Glass Stegal in the US has made this easier than ever.)
Baytex lacks sufficient institutional ownership. With the debt levels we have, many institutions can not own this stock because of policy. Low share price means the possibility of de-listing again. Debt levels place the fear of bankruptcy in the minds of those considering Baytex ownership.
Where the merger went wrong, besides using debt, was a lack of consolidation in the new combined entity, plus the premium we paid to make the agreement. Baytex got 1:1 and Ranger shareholders got 7:1. The new entity had over 850 million shares, resulting a falling share price, while institutions rebalanced their holdings based on policy.
A better solution, if you must acquire using debt, would have been Baytex 1:2 and Ranger 3.5:1, resulting in half the outstanding shares in the new entity. You could call this action a consolidation, instead of a reverse split. We no longer have that option. Then, Allocate 80% of free cash flow to eliminating the debt, and pay a dividend with the remaining 20% cash flow. True, enterprise value would be lower, market cap would be what the market decides, and the fears of de-listing and bankruptcy would be gone. Institutions would be more interested in owning Baytex. If you need an example of why this is true, the refer to the conditions Baytex had when it hit around $9 Canadian a few years back.
I would support replacing our current CEO, with one who has a different financial philosophy. I am OK with making acquisitions, using cash instead of stock or debt. The shareholders should not be put behind the banks in line for the “Spice”, as we are now. By using cash, you EARN the right to acquire, the proper way.
I would like to see Baytex added to indicies other than oil and gas related ones. I would like to see 75% or greater institutional ownership, with a small free trading float. I would also like this to happen while I am still alive.
Back to the shadows for me. My apologies to the board for my lack of participation in recent years.
PS: I have seen my posts disappear for a short time while it rolled from page 1 to page 2. I am certain nobody has ever reported me for any reason. It’s just software not being perfect.
GLTA