Hi Friends,
Last week I spoke about a handful of different event driven ideas I like. Namely: STCN, RBCN, SAVE, PGNT, OXY, and BALYs.
Luckily, ever single one of them ended up working out. However, some not quite as I had hoped.
First, RBCN.
I initiated a large position in RBCN around $15.71. With JANL coming in and tendering at $20 and a special dividend coming shortly thereafter for $11, I viewed the trade as fairly low risk. I made this a large sized bet and was prepared to make a few percentage points on the upside without much risk on the downside. Last week shares hit $16.30 where I offloaded a bit. I'll be keeping my remaining shares to tender this week.
Second, SAVE.
For some reason shares of SAVE were trading around $24 with a super high likelihood of the Frontier vote getting rejected in favor of JBLU's much better offer. I initiated a position before the vote and sold most of my shares after the vote was rejected in the high $25 range. I initiated a position again, but envision shares will trade range bound until we get more clarity on JBLU's likelihood of deal approval. I'm going to put this one on the back burner for a bit.
Third, PGNT.
I really like PGNT. They own 80,000 shares of RBCN which has worked out really well. They also own SRG which has gone nearly parabolic over the past month. For some reason, PGNT shares haven't really budged much. I anticipate the market will value the company more in line with book value over the near term. I'm remaining long with a cost basis of $7.70. Shares right now are trading in the $8.00 - $8.25 range. No plan on selling any time soon.
Fourth, OXY.
OXY has been a banger of a trade. I'm not really sure why shares have dipped below $60, but I used that as a great opportunity to add. Warren Buffett has made it abundantly clear that he will continue to add to his stake if shares dip in the $50 - $60 range. Oil demand has appeared to slow, but I view the demand destruction as a more temporary price sensitive matter rather than a large amount of supply coming on line. I'll continue to happily trade OXY in the high $50s/low $60s range to the mid $60s range. The Oracle of Omaha has my back here, so there shouldn't be too much down side risk if oil continues to show weakness. Currently no position as I offloaded in the mid $62 range yesterday, but I anticipate I'll be able to add to my position again (I hope!).
Fifth, BALY.
So, with BALY I was dead-ass wrong. I thought the tender offer would be over subscribed and thus any residual shareholders wanting to tender will sell their shares. Turns out the tender was undersubscribed and there was never going to be any selling pressure after the tender expired (whoops!). Luckily, the market worked in my favor and I was actually able to close out my short put position and short BALY position at a very small gain. The thesis was busted on this one and the market gods cut me some slack. I still believe trading around a tender offer can offer some nice upside, but this one didn't pan out as planned. Next time!
Lastly, STCN.
I really like the proposition of a bump in price for the STCN merger. I decided to sell my position though for a $0.01 gain to add more to my OXY & SAVE position. I'd happily re-enter, but I'd like to keep some dry powder lying around for some other opportunities I'm looking at. I'll take the $0.01 gain though!
New positions I'm thinking about:
- Ethereum leading up to the Proof of Stage ETH 2.0 merge next month.
- Re-entering PEGY in the $2.50 range when all the day traders walk away (see my Seeking Alpha article)
- I bank merger arb that I'm trying to get filled if my bid is ever hit. Will update shortly hopefully!
Until next time,
Josh