Oreninc Blog

Oreninc Blog

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Orenthink: Recovery

The step you hit one step after rock bottom.

I have been accused of writing everything I write in religious and food terms, so let’s start talking about the public markets in addiction terms.

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Rollbacks

Everyone is looking for solutions to this crisis.

One of the popular ones is the concept of a rollback; theoretically, if you roll back a company you end up with less shares and more value per share. So if you had 100m share at 5 cents per share outstanding and you did a 10x roll back, you end up with 10m shares at 50 cents per share. Do that a couple of times with a $2-4m raise each time and the original shareholders own 10% of the company (maybe). Rollbacks rarely work and the reason is simple: usually, they are used as a bandaid over a heart that needs a quad bypass. 

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When You Cannot Act, Plan

Which are you: a Mack truck, a deer, or a planner? Figure it out.

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Eaten at Both Ends

Being a small cap investor in this market is hell and that’s because your portfolio is being eaten at both ends. 

At one end, your winners are being looked at like raw sushi by majors/mid-tier producers, who know a deal when they see it and know that if you buy in a down market you do not overpay. I think we are going to see lots of companies that could have been real winners go away for pennies on the dollar.  Imagine a whole fresh copper river salmon going for the price of six salmon rolls (and that’s at the cheap sushi place around the corner from Teck’s office on Bentel). 

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So You’re the Guys That Rank the Bankers

I was stuck on a long layover that turned into a longer layover in Houston, and I pitched Oreninc to the CEO of a mid-tier oil and gas company who was sitting a row ahead of me on the plane. 

After listening to me talk about Oreninc, he had four key points in response:
 
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Why the Consolidation of Media Is Bad for Junior Mining Stocks

Twenty years ago, regional papers were writing meaningful regional mining business stories. I could expect to see significantly different localized content in Calgary vs. Toronto.  Today, when you look at the top mining journalists, they are all chasing the same big cap stories.

 

 

There is lots of noise and other stuff in the blogosphere to make up for that, but none of that has the independence of traditional media. (There is no independent research either; unless a company wants the research published, there is nothing published.)

 

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Are We There Yet?

Are we there yet?

 

My kids ask this on every road trip. It starts when we get about 20 minutes from the house and about one hour before we get “there”.... The thing is, they don’t really know where we’re going and they don’t know what “there” looks like. They know where they started from, they know what they have to distract themselves over the trip, and they even know how many snacks there are to eat--they just don’t know the destination.

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NIMBY: Not In My Backyard

NIMBY: Not In My Backyard

Lots of coal-based projects have been killed or delayed this week. I am not sure that coal is the solution to all problems, but I think we need to be rational about what we are doing around it.  We are killing coal mines in BC that are doing coking coal, and we are exporting petroleum coke vs. processing it into electricity in America or Canada where we will scrub it and clean it. 

You want your iPad, iPod, car, house, light bulb, TV.... You want your food to come in a box and be affordable, you want your meat to be clean and fairly cheap. You want electricity to come out of the wall without any fuss. The key is that you want EVERYTHING to happen somewhere else. 

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Lots of Respect for Mick

The fact is that this downturn is not going to last and even Mick (Mick Davis, outgoing CEO of Xstrata) is figuring out how to position himself for the recovery. 

I remember back when I had a real job sitting in a room with Mick and a bunch of angry shareholders, and someone (a fund manager) asked him to apologize for issues from 2008. He was defiant and just laid into the poor guy. He was right and the fund manager was wrong.

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Why We’re Not Showing You Who Will Fail

There used to be a website called F-ckedcompany.com. It kept track of the high tech companies that were f-cked and was full of rumors and gossip, and frankly was one of the best pre-Twitter gossip sites on the Internet. 

I was addicted to it for a while, never posted, but read everything. 

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