"Hey, where'd my portfolio go?" -- every retail investor, a few times a month
Friday morning saw two big mystery movers on the Canadian exchanges, both tied to one another in a bad news scenario.
The catch? You didn’t hear about the news
until the insiders were done selling up.
Africa Hydrocarbons (TSX:V.NFK
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), which has been loading up on retail investors for months, at least if our Bullboard stats are anything to go by, dropped 46% through the morning, with the sell-off coming almost from the opening minutes of trading.
This confused Johnny Lunchpail. After all, the regular joes had been hearing about how great V.NFK’s Tunisian oil play looked for months, and they’d sunk in a lot of dough waiting for news of black gold.
They might have been better off just burning the cash – at least they would have got a little heat for a few minutes.
If they were expecting a level playing field on the game of investing in V.NFK, clearly they were out of luck because the big money had info they didn’t.
JV partner DualEx Energy (TSX:V.DXE
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) was no better. While DualEx stock held up for most of the morning, it too plunged before the trade halt, losing the gains it had made in climbing 100% since October.
Let’s be clear: I highly doubt the CEO was on the phone barking “SELL! SELL!” all morning. In fact, I highly doubt anyone serving as an officer of the company or a director or their families were involved in the sell-off because, if they were, that’d be pretty easy for regulators to see and it’s very difficult to get a nice bottle of red in prison.
But someone talked. Someone knew the Tunisian well had problems and they sold hard. And that likely triggered a lot of stop loss trades which made the sell-off bigger. And then retail, realizing something was up, got scared and bailed too.
And then – and only then - the news that started all this was actually released to the public, with a short trade halt period surrounding it.
Why the halt was only an hour is beyond me because, from the moment trading resumed, without any real time for a valid assessment or discussion of the news, it just made sense for everyone to get out. It was a good old-fashioned run on both stocks.
As of the time of writing, V.NFK continues to crumble – it’s dropped from $0.13 to $0.09 since the trade resumption with 17.5 million volume. It started the day at $0.245.
DualEx too went from $0.19 to $0.09 after the resumption of trading, having started the day at $0.33.
Long holders are getting hammered like Charlie Sheen and Rob Ford on a brewery tour. They got blitzed like Tim Tebow. If their charts started at the Whistler ski summit this morning, they are currently at English Bay, up to their knees in water and walking toward Russia.
BUT – there’s potentially an opportunity for Roger Retail this afternoon. Let’s be clear – the well news sucked, but it points to a delay in production, not an end to the play. If you take a step back and realize these companies aren’t abandoning the well, nor out of money, and that both Africa Hydrocarbons and DualEx are $30m market cap companies now trading as $10m market cap companies, there’s doughbucks to be made if you’re able to hang in for a few months.
The only question is, has the panic subsided, or is there still some Godzilla fleeing to be done?
The big money is gone, but it will likely come back shortly.
Maybe it won’t be this afternoon. Maybe it’ll be Monday, after the companies have got their act together and figured out how to explain the situation to the layman in a way that points out the upside. Maybe it’ll be next week, or next month, after the operators learn how to perforate.
But the question you need to ask yourself is… is there oil in that hole?
At $0.08, perhaps the answer is worth a flyer. And maybe this is a rare chance to get in before the big money insiders, rather than after them.
As for who caused the run? We may never know. One thing is for certain, the regulators should be looking hard at all trades today and doing the legwork to see if any of those sellers were privy to inside info. Short of a complete freaking fluke of nature, there appears to be little question some traders were working with more information than the rest of the market.
And aren’t you all just a littttttle bit sick of that?