The Great Seadrill trade I missed and the OCC

First, because I cannot resist — just replace “OPP” with “OCC” when you sing along.

I’m not down with OPP. But I am down with The OCC (The Options Clearing Corporation). They are the ones who determine settlement and other important technical details of traded options. For most options traders, The OCC is unimportant — each option has a strike price and an expiry date and that is all that really matters. But when there are corporate events such as mergers, splits, bankruptcies, and the like, the OCC’s decisions become important.

Seadrill Inc (SDRL) just emerged today from its long trip through bankruptcy. From the company’s press release:

SDRL – Seadrill Announces Emergence from Chapter 11

Hamilton, Bermuda, July 2, 2018 – Seadrill Limited (“Seadrill” or the “Company“) announces today (the “Effective Date“) that it has emerged from chapter 11 after successfully completing its reorganization pursuant to its chapter 11 plan of reorganization (the “Plan“). All conditions precedent to the restructuring contemplated by the Plan have been satisfied or otherwise waived.

The Plan has equitized approximately $2.4 billion in unsecured bond obligations, more than $1 billion in contingent newbuild obligations, substantial unliquidated guaranty obligations, and c. $250 million in unsecured interest rate and currency swap claims, while extending near term debt maturities, providing the Company with over $1 billion in fresh capital and leaving employee, customer, and ordinary trade claims largely unimpaired.

The Plan has re-profiled the Company’s debt and provided substantial liquidity that puts the Company in a strong position to execute its business plan. The figures presented below highlight key financial metrics as of the Effective Date:

  • total cash of c.$2.1 billion;
  • secured bank debt of c.$5.7 billion with the first maturity in 2022;
  • new Secured Notes of c.$880 million maturing in 2025;
  • backlog of c.$2.3 billion for Seadrill Limited, excluding Seamex and Seadrill Partners; and
  • common shares issued of 100 million as described further below.

Issuance, Listing and Trading of New Common Stock

The Company has received approval to list its new common shares with the new CUSIP number G7998G 106 (the “New Common Shares“) on the New York Stock Exchange (the “NYSE“) under the same NYSE ticker symbol “SDRL” as the Company’s existing common shares (with the CUSIP G7945E 105) (the “Existing Shares“).  Subject to the relevant approvals, the Company also intends to have its equity listed on the Oslo Stock Exchange (ISIN BMG7998G1069).

On the Effective Date, the Company will have approximately 100 million New Common Shares outstanding.  The New Common Shares will be allocated as set forth below, in accordance with provisions of the Plan and issued on the Effective Date:

  • 14.25% of the New Common Shares issued to holders of unsecured claims against the Company and certain of its chapter 11 debtor affiliates;
  • 23.75% of the New Common Shares issued to participants in the $200 million equity investment under the Plan;
  • 54.625% of the New Common Shares issued to participants in the $880 million new secured notes investment under the Plan;
  • 1.9% of the New Common Shares issued to holders of existing common equity interest in the Company as of the Effective Date, an effective exchange ratio of approximately 0.0037345 New Common Shares per each Existing Share, and
  • 5.475% of the New Common Shares issued as a structuring fee to certain of the new money investors.

Trading in approximately 16 million New Common Shares issued to existing shareholders and holders of unsecured claims will commence on the NYSE one day after the Effective Date, on July 3, 2018, under the ticker symbol “SDRL”. Additional shares may commence trading in the coming weeks after a resale registration statement on Form F-1 with respect to additional shares issued on the Effective Date to certain investors is declared effective by the Securities and Exchange Commission. The Existing Shares will continue to trade on both the NYSE and Oslo Stock Exchanges under the same ticker symbol through the close of trading on the Effective Date but thereafter such trading will be suspended and the shares will be cancelled in due course.

Because the Company will continue to use the ticker symbol SDRL, holders of Existing Shares, brokers, dealers and agents effecting trades in the Existing Shares, and persons who expect to receive New Common Shares or effect trades in New Common Shares, should take note of the anticipated cancellation of the Existing Shares and issuance of New Common Shares, and the two different CUSIP numbers signifying the Existing Shares and the New Common Shares, in trading or taking any other actions in respect of shares of the Company that trade under the “SDRL” ticker.

Any questions regarding these distributions should be directed to the Company’s claims and noticing agent, Prime Clerk, on the numbers provided below.

Yesterday the OCC filed the preliminary notice (pdf) for how SDRL options would be treated. Below is the important part:

On April 17, 2018, United States Bankruptcy Court for the Southern District of Texas Victoria Division confirmed the Second Amended Joint Plan of Reorganization (“Plan”) for Seadrill Limited (SDRL). The Plan became effective on July 2, 2018, and SDRL shares were canceled. Under the Plan, SDRL shares will be converted into the right to receive approximately 0.0037345 (New) Seadrill Limited Common Share. Pursuant to the Plan, fractional shares will be rounded up or down to the nearest whole share with half shares being
rounded down.

Because fractional share amounts less than 0.5 will be rounded down, it is anticipated that SDRL1 options will not be adjusted to call for delivery of (New) SDRL Common Shares (100 x approximately 0.0037345 = approximately 0.37345). OCC will delay settlement until the final rate has been confirmed.

What this means is that the options will now be for zero shares of new SDRL. So one $0.50 put will pay out $50.00. So even if someone had bought $0.50 puts at $0.45 yesterday they will still make a nice 11% return. Do note that this OCC memo is preliminary and the final memo and settlement have not yet occurred. I will update this blog post once final settlement on the options has occurred.

Comparison to Ocean Rig (ORIG) bankruptcy emergence options adjustment

In September 2017 Ocean Rig UDW (ORIG) emerged from bankruptcy with old shareholders getting a tiny fraction of new shares. In that instance, the old options were cash-settled. See the preliminary OCC notice (dated 9/21/2017) and the final OCC notice (dated 9/27/2017).

From the preliminary OCC notice:

Ocean Rig UDW Inc. (ORIG) has announced a 1-for-9200 reverse stock split/Scheme of Arrangement. As a result of the reverse stock split/Scheme of Arrangement, each ORIG Common Share will be converted into the right to receive approximately 0.0001087 (New) Ocean Rig UDW Inc. Common Shares. The reverse stock split will become effective before the market open on September 22, 2017. Cash will be paid in lieu of fractional ORIG shares

The cash in lieu amount was then determined ( and announced in the final OCC memo:

Adjusted Ocean Rig UDW Inc. options were adjusted on September 22, 2017 (See OCC Information Memo #41867). The new deliverable became cash in lieu of approximately 0.01087 fractional ORIG Shares. The settlement of the ORIG1 options exercise/assignment activity was subject to delayed settlement.

OCC has been informed that a price of $23.50 per whole ORIG share will be used to determine the cash in lieu amount at a rate of 0.01087.

Accordingly, the cash in lieu amount is:
0.01087 x $23.50 = $0.26 per ORIG1 Contract

Now that the exact cash in lieu amount has been determined, OCC will require Put exercisers and Call assignees, during the period of September 22, 2017 through September 27, 2017, to deliver the appropriate cash amount

I was told by an experienced trader that I trust that how the OCC determines settlement in these cases of corporate events is determined by the company — so when a similar situation happens in the future both the cash in lieu of settlement and the rounding of shares (up or down) are both possible.

For the record: some final charts of Seadrill during the bankruptcy:


And here is a final chart of Seadrill affiliate North Atlantic Drilling (NADLQ), whose shareholders were completely wiped out in the bankruptcy:

I did not short NADLQ because of the high borrow rate and low price and uncertainty about when the stock would be deleted.

And here is the Ocean Rig UDW (ORIG) chart showing the time during which it emerged from bankruptcy — it appears that the two daily candlesticks in the $700 range are data errors — the stock closed at $0.075 on the last day of trading prior to emergence from bankruptcy and the 9200 for 1 reverse split. It opened around $40 the next day (it actually opened above $100 but those trades were busted)

Here are charts showing the actual prices (with no apparent data errors):

Disclaimer. I am short a tiny position of SDRL July 20th 2018 $0.50 calls. No position in any other stock mentioned and I have no relationship with anyone mentioned in this post. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Tactical Services (TTSI) Stock promotion: emails and boiler room

Note: When I published this on 11/15/2017 Tactical Services was trading as LUADD. It is now trading as TTSI. 

The new stock promotion on the block is Tactical Services (LUADD). It isn’t completely new — it has been going on since October 26th. However, while I tweeted about it, I didn’t blog about it because volume was low and it looked like it was failing quickly. Also, I couldn’t sign up for the promoter’s email list. However, with the recovery in the stock price and hearing that there is a boiler room promoting the stock I decided to blog about it. Keep in mind that boiler room pumps usually result in the biggest dumps. The last big boiler room pump and dump was Homie Recipes (HOMR; now trading as STVA Stevva Corp), which quickly dropped from $1.80 to $0.20 in two days. I traded it horribly (shorting at $1.90 and covering my short at $0.80) and still made decent money. It now trades at $.002.

Here is the STVA daily candlestick chart — trading in it was suspended for two weeks by the SEC on October 5th.

The LUADD stock chart does not appear nearly as well controlled / manipulated as STVA/HOMR did, but it has been slowly upticking on pretty decent volume for the last 7 days.

Below is a screenshot of an email promoting LUADD. Thanks to @TheReal666 for posting this on Twitter. Unfortunately the disclaimer is too small for me to read.

Other reliable sources have confirmed the Stock Callers promotion of LUADD:

I tweeted about the LUADD stock promotion on October 31, pointing out that the number of shares outstanding was a lot higher than many thought:

According to, the StockCallers promotion group is comprised of the following websites:

The top three of those websites no longer exist and I cannot sign up for the email list.

As of 11/17/2017 Tactical Services has begun trading as TTSI.

Update 3/8/2018: I finally got around to updating the chart of TTSI/LUADD. The first big down day (11/16/17) was as LUADD and the following day it began trading as TTSI.

Disclaimer. I am currently short LUADD and may add to my short or cover it at any time. No position in any other stock mentioned and I have no relationship with anyone mentioned in this post. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

An Introduction to shelf registrations

Probably the most common kind of way of issuing and registering new stocks is a shelf registration. This is filed on SEC Form S-3 (F-3 if the issuer is a foreign company). These can be used with multiple types of offerings, including most commonly PIPEs, Private Investments in Public Equities, where the shares have been sold to an investor and the shares are now being registered so that investor can sell those shares; ATMs or At the Market Offerings (PDF), where a company sells shares into the open market from time to time; and registration of shares underlying warrants or convertible bonds.

Shelf Takedowns by Greenberg Traurig (PDF)
FAQs about Shelf Offerings by Morrison Foerster (PDF)

Besides the actual shelf registration statement, the company has to file a prospectus supplement within two days of whichever comes first, the offering being priced or the shelf registration being used. Also, just because a shelf registration is filed does not mean it can be used immediately — the registration needs to be declared effective after the SEC reviews the registration. This typically takes two to three weeks from when the registration statement is filed. When a shelf registration (or another registration statement) has become effective a form EFFECT will be posted. For example, here is a shelf registration, prospectus, and EFFECT for Diana Containerships (DCIX):


Disclaimer. No position in any stocks mentioned and I have no relationship with anyone mentioned in this post. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Catalysts in the trading of bankrupt companies and why Republic Airways $RJETQ is going to zero

The rule of thumb in bankruptcy is that 90% of the time shareholders get completely wiped out. Maybe 8% of the time shareholders get a tiny bit of equity in the new (post-bankruptcy) company or out of the money warrants to buy that equity. Only 2% of the time or less do shareholders get a large recovery. Of course, that 2% of the time is what gives hope to shareholders in the 98% of bankruptcies. General Growth Properties (GGP) is a good example from the 2008 financial crisis and American Airlines (AAMRQ at the time) is a more recent example from 2014. A current company in bankruptcy where it is possible that shareholders may get a meaningful return is Peabody Energy (BTUUQ); the current price values the equity at $250 million although the company still says that shareholders will be wiped out. Peabody has yet to file a bankruptcy plan; it has been granted an extension by the court until December 14th. [The above paragraph has been edited to specify that a meaningful return for equity holders is possible; a prior version said it was probable.]

There are a few key events in a bankruptcy proceeding that should drastically affect the stock. First, the bankruptcy filing, which almost always crushes the stock although in cases where that was expected the drop may be 30% rather than 80%. The next event is the formation of an equity committee (or rejection by the judge of an equity committee): this indicates a meaningful probability of shareholders receiving something and not getting completely wiped out. Next comes the filing of the bankruptcy plan, which lays out how much different classes of creditors and equity holders will get. For various reasons the bankruptcy plan is often changed or amended multiple times. Next comes the vote on the bankruptcy plan and approval by the judge: if the plan is approved then the bankruptcy will become ‘effective’ shortly thereafter. The effective date is usually not known more than a few days in advance and it should come a couple weeks after the plan is approved. On the effective date the bankruptcy is closed, old shares are wiped out, and new equity is distributed to creditors.

It is important to note that there are other (less common) ways that a bankruptcy can end: the old equity can remain after essentially all the assets have been sold with the proceeds going to the creditors (this is what happened recently with Saratoga Resources (SARA), and in this case the equity essentially owns a shell company).

Shareholders of a bankrupt company can keep the stock price at an unrealistic level even when they are likely to get wiped out. However, the events mentioned above tend to be catalysts for sending the stock price towards its fair value.

Here is a chart of Cosi (COSIQ); the big down day is when the company declared bankruptcy.


Next is the chart of C&J Energy (CJESQ) — November 4th in premarket the bankruptcy plan was revised to give shareholders 2/3 fewer warrants in the new equity.

The evening of November 4th the judge denied the request for formation of an official equity committee.



Here is the chart of Republic Airways (RJETQ): the bankruptcy plan was filed after-hours on 11/16/2016. The plan calls for shareholders to be completely wiped out and get nothing.


Next is the chart of Hercules Offshore (HEROQ) with the big drop on November 1st coming after the judge approved the bankruptcy plan:

The final even in bankruptcy is the effective date. As I stated above this is not known far in advance — it depends on if there are any objects or delays after the plan is confirmed. Below is the chart of Arch Coal (ACIIQ; the post-bankruptcy stock trades as ARCH). On September 30th the company filed an 8-K stating that the effectiveness date was anticipated as being October 5th. The stock promptly dropped bigly.


Republic Airways (RJETQ) and understanding a bankruptcy plan

An official equity committee was never approved by the judge because unsecured creditors were set to lose over 50% so the likelihood of equity holders getting any recovery was very low. The evening of November 16th a bankruptcy plan was finally filed. You can see the bankruptcy court docket for free. To find free bankruptcy court dockets, just Google “[company name] bankruptcy docket”. The various corporate bankruptcy trustees all make these available. In the case of Republic Airways, docket 1089 is the bankruptcy plan and docket 1090 is the plan disclosure statement.

The most important part of the bankruptcy plan is the listing of claimant classes and what they will receive at the confirmation of the plan. Here is that list for Republic:


Interests in RAH include the stock of Republic; but don’t take my word for that: the first part of the plan has definitions of all the relevant terms.

From page 9:

“Interest” means any equity security within the meaning of section 101(16) of the Bankruptcy Code including, without limitation, all issued, unissued, authorized or outstanding shares of stock or other equity interests (including common and preferred), together with any warrants, options, convertible securities, liquidating preferred securities or contractual rights to 16-10429-shl Doc 1189 Filed 11/16/16 Entered 11/16/16 18:56:36 Main Document Pg 14 of 68 10 purchase or acquire any such equity interests at any time and all rights arising with respect thereto.

From page 13:

“RAH” means Republic Airways Holdings Inc., a Debtor in these Chapter 11 Cases.

Page 25 has the details of how interests in RAH will be treated (emphasis mine):

i. Interests in RAH (Class 5) i. Impairment and Voting. Class 5 is impaired under the Plan. Holders of Interests in RAH are deemed to reject the Plan under section 1126(g) of the Bankruptcy Code and are not entitled to vote on the Plan.

ii. Treatment. Upon the Effective Date, all existing Interests in RAH shall be deemed cancelled and extinguished and the holders of such Interests shall not receive or retain any property on account of such Interests under the Plan.

If that isn’t clear enough, look at page 92 of the disclosure statement (emphasis mine):

2. Consequences to Holders of Existing Interests in RAH Holders of interests in RAH, which are being cancelled under the Plan, will be entitled to claim a worthless stock deduction (assuming that the taxable year that includes the Effective Date of the Plan is the same taxable year in which such stock first became worthless and only if such holder had not previously claimed a worthless stock deduction with respect to any Interest  in RAH) in an amount equal to the holder’s adjusted basis in the Interest. If the holder held its Interest in RAH as a capital asset, the loss will be treated as a capital loss.

Republic stock gapped down after that bankruptcy plan was filed but thankfully bounced enough for me to short over $0.50. Considering that the company stated in a press release then that it expects to emerge from bankruptcy in the first quarter of 2017 and that the borrow rate on RJETQ at Interactive Brokers is under 4% APR (effectively 12% because that is calculated on short collateral), I continue to believe that RJETQ is a good short. I expect the stock to slowly fade over the coming two months and drop under $0.10 once the plan is confirmed.

Disclaimer. I am short RJETQ and may add to or cover my short at any time. I have traded all the other stocks mentioned but currently have no positions in them. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Fake (or just dumb) tender offer PR leads to brief Freeseas $FREEF spike

Yesterday Havensight Capital LLC put out a press release announcing a tender offer for the shares of FreeSeas (FREEF), a distressed shipping company. For posterity the press release is quoted in full below. As of the writing of this post the PR has been removed from Yahoo Finance but is still on the OTCMarkets website.

Havensight Capital makes Tender Offer for Free Seas Inc. and Launches

Jun 16, 2016
OTC Disclosure & News Service

CHRISTIANSTED, United States Virgin Islands, June 16, 2016 (GLOBE NEWSWIRE) — Havensight Capital LLC makes tender offer for 85% of the outstanding common shares of Free Seas Inc. (FREEF) for U.S. $0.43 a share, commencing on July 25th, 2016, and ending November 25, 2016. Havensight Capital LLC will serve as the paying agent. Mr. Benjamin Woodhouse, Director, Havensight Capital LLC said, “Global transportation logistics are a critical component to the World economy, we are very excited about the potential to now capitalize on growth trends in this market.”

Havensight Capital LLC also announced the launch of the Super Mall of The Super Mall of offers world class website design, hosting, and maintenance, all, for one low published rate. Customers can access the Super Mall of team by going to and placing an order online. Mr. Benjamin Woodhouse, Director, Havensight Capital LLC said, “we have been pleased with the incredible global demand for our soccer brand, St. Thomas F.C.,, and we are now capitalizing on such momentum, by adding a leading technology service provider to our portfolio.”

About Havensight Capital LLC

Havensight Capital LLC is a leading private equity firm, which is based in the U.S. Virgin Islands. The Firm specializes in investing in stellar consumer product companies that have, either, a technological advantage, or, have the potential to be exceptionally disruptive in their respective markets. The Firm seeks to actively maximize the potential of each, and every investment. Currently, Havensight Capital LLC owns, and operates, St. Thomas F.C. soccer brand, St. Thomas G.C. golf brand,, Coffee Ostrich consumer products, and the Super Mall of

Ben Woodhouse
Havensight Capital LLC
5030 Anchor Way
Christiansted, VI. 00820
(805) 478 1958
Copyright © 2016 GlobeNewswire. All Rights Reserved

Unfortunately I was away from my computer for 20 minutes when the press release was put out otherwise I would have shorted into the stock’s spike. With the clarity of hindsight I can say now that I should have shorted even after it had already dropped because it was likely to completely erase the gains from that press release. Below is a one-minute chart of the stock.

There were a few things about the press release that struck me as odd and made me suspect that it was a fake. First, Havensight Capital is a no-name firm and their website lists their portfolio companies (also no-name companies) and includes Freeseas (when they have never filed a 13G or 13D or form 4 to indicate ownership of Freeseas stock). Also, the tender offer is way higher than the current stock price of FreeSeas and with the company’s troubles (all shippers have had a hard time the last few years) it would not make sense to me to buy the equity. Anyone interested in Freeseas could likely buy its debt at a steep discount and then take over after the company enters bankruptcy. For me though the biggest indicator that the press release was not serious was that half the press release was about Havensight Capital’s other companies; I have never seen anything like that before in a tender offer or buyout offer press release.

This morning FreeSeas put out a press release calling the Havensight Capital LLC tender offer “false and misleading.” The full press release is below:

FreeSeas Inc. Responds to Havensight Capital Misleading Press Release

Athens, June 17, 2016 (GLOBE NEWSWIRE) — FreeSeas Inc. (FREEF) (“FreeSeas” or the “Company”), a transporter of dry-bulk cargoes through the ownership and operation of a fleet of Handysize vessels and an owner of a controlling stake in a company commercially operating tankers, responded today to a press release published yesterday afternoon by Havensight Capital LLC (“Havensight”).

In its press release, Havensight indicated that it was making a purported tender offer to acquire 85% of the Company’s common stock at a price of $0.43 per share.  FreeSeas was not aware of Havensight’s intention to issue such a press release and did not authorize Havensight to use the Company’s name and symbol so that the press release would appear in the FreeSeas’ news feed.  Further, upon learning of the press release, the Company reached out to regulatory authorities to alert them to the actions of Havensight.

FreeSeas believes that the Havensight press release is false and misleading, in that it failed to disclose material facts.  In particular, the Havensight press release fails to disclose that Havensight has not made the necessary filing with the U.S. Securities and Exchange Commission in order to commence a tender offer.  Such tender offer filing would require Havensight to provide significant disclosures about itself, its financial position, the source of the funds in order to complete the tender offer, among other required disclosures.

Unless and until a valid tender offer is made, the Company will not comment further regarding the actions of Havensight.  The Company believes Havensight may continue to disseminate false and misleading information. Public investors are urged to rely only on information authorized for dissemination by FreeSeas.

About FreeSeas Inc.

FreeSeas Inc. is a Marshall Islands corporation with principal offices in Athens, Greece. FreeSeas is engaged in the transportation of drybulk cargoes through the ownership and operation of drybulk carriers and also is an owner of a controlling stake in a company commercially operating tankers. Currently, it has a fleet of Handysize vessels. FreeSeas’ common stock trades on the OTCQB Market run by OTC Markets Inc. under the symbol FREEF. Risks and uncertainties are described in reports filed by FreeSeas Inc. with the SEC, which can be obtained free of charge on the SEC’s website at . For more information about FreeSeas Inc., please visit the corporate website,

Forward-Looking Statements

This press release contains forward-looking statements (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events and the Company’s growth strategy and measures to implement such strategy. Words such as ”expects,” ”intends,” ”plans,” ”believes,” ”anticipates,” ”hopes,” ”estimates,” and variations of such words and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in the demand for dry bulk vessels; competitive factors in the market in which the Company operates; risks associated with operations outside the United States; and other factors listed from time to time in the Company’s filings with the Securities and Exchange Commission. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based.

Contact Information:

At the Company

FreeSeas Inc.
Dimitris Papadopoulos, Chief Financial Officer
Fax: 011-30-210-429-10-10

The one big question I am left with at this point is why Havensight Capital LLC would put out such an obviously misleading press release. I have seen fake tender offers and buyouts before but they are usually from fake companies. Havensight Capital is real (see for example their lawsuit against Google from a year ago). Either they put out a fake PR to manipulate the stock (in which case they will be quickly sued and sanctioned by the SEC) or they actually intend to buy those shares (there aren’t many outstanding), in which case they are complete morons because their ownership position will be highly diluted by convertible shares and warrants already outstanding:

As of May 10, 2016, we had 1,832,807 shares of common stock issued and outstanding, convertible notes outstanding that may be converted into an estimated 138,774,955 shares of common stock at current market prices and outstanding warrants to purchase 7.346 shares of our common stock that could result in our issuance of 131,262,660 shares of common stock based upon the exchange formula contained therein at current market prices. Although the investors may not convert their secured convertible note and/or exchange the Series C Preferred Shares if such conversion or exchange would cause them to own more than 4.99% of our outstanding common stock, this restriction does not prevent the investors from converting and/or exchanging some of their holdings and then converting the rest of their holdings. In this way, the investors could sell more than this limit while never holding more than this limit. There is no upper limit on the number of shares that may be issued which will have the effect of further diluting the proportionate equity interest and voting power of holders of our common stock. The conversion or exercise of our outstanding convertible securities could result in substantial dilution to our existing holders, and the sales of such material amounts of our common stock issued upon conversion or exercise could cause the market price for our common stock to decline.

The above is from Freeseas’ most recent 20-F (annual report) filing.

Disclaimer. I have no position in any stock mentioned above. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.


Algos for everyone: Interactive Brokers’ adaptive algo could be a great tool

Recently I wrote about customizing IB’s smart routing. Particularly for larger orders though it is desirable to break orders into smaller chunks so as not to give the market too much information which can lead to other traders front-running large orders. Iceberg orders work fine but are so-so at best at limiting information leakage — any trader watching time and sales on a stock will quickly notice if a small bid/offer keeps filling many more shares than are displayed. One solution is simply to send multiple different small orders by hand. This can be slow and increases the probability of fat-finger errors (selling/buying too many or too few shares by accident).

IB has multiple different algorithmic order types but until now they have been relatively esoteric and not geared towards the smaller trader. But with the introduction of IB’s adaptive algorithm order real power is given to small traders. Just tell the algorithm your limit price and how aggressive you want it to be and it will take care of the rest for you, splitting your order up, attempting to offer price improvement and good fills.

I tried the adaptive algo for the first time today with the patient setting on a short sell limit $0.42 for 3,000 shares of CJES. I had earlier sold 3,000 shares on the offer through NSX, getting an easy fill with low cost ($3.78 net commission).

Here is the chart of the stock as I was selling short:

Here are my fills:

One trade is not enough to draw any conclusions but the algo did a good job at splitting up my order and filling on the offer. I look forward to getting a chance to try the aggressive settings on this algo.


Disclaimer: I am short CJES. I have no relationship with any parties mentioned above (other than IB being one of my brokers). This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

How to be dead wrong about Kalobios Pharmaceuticals $KBIO

Needless to say, my previous post on KaloBios Pharmaceuticals was dead wrong. Martin Shkreli and friends bought up the majority of the company over the past couple days (at under $2 per share on average) and their SEC Form 4s after the close yesterday caused a massive short squeeze that sent the stock up to $24 in premarket today. The one thing I did not account for was the possibility that someone would see value in the company’s drugs and rescue the company. That is essentially what Shkreli is doing, as he explained to Fierce Biotech. In the future I will avoid any such overnight shorts on companies with substantial intellectual property even if I think it has little value, particularly if the market cap of the stock is low. Even a small risk of a catastrophic loss on a trade is too much.

I apologize for completely failing in my analysis. Luckily I had set up an alert for SEC filings on KBIO so I was able to cover my short for a small loss (around $4,000 net) at $2.0833. Hopefully my readers also avoided catastrophic losses. If you look at my trades on you will see a large loss at IB but a slightly smaller large gain at CenterPoint Securities. It is quicker for me to trade at CenterPoint so I just bought there at first to get flat.

Below is a screenshot of my posts in TimAlerts chat mentioning my cover and the news:


See all my posts here.

Disclaimer: I have no position in KBIO but I will likely trade it after posting this article. I have a close business relationship with Tim Sykes (see Terms of Use for details). I have no relationship with any other parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

A short analysis of Kalobios Pharmaceuticals $KBIO liquidation value

Disclosure: I am short KBIO and I intend to actively trade the stock after this post is published. See full disclaimer below.

Here is my back of the envelope calculation of the value of Kalobios Pharmaceuticals (KBIO). This was first posted in the TimAlerts chat, where I am and have been a moderator for years.

Nov 16, 2:37 PM MichaelGoode okay here is my analysis of KBIO — using very optimistic assumptions (as a short, to make the analysis more conservative for shorting): $10m in net quick assets as of June 30th. Assume cash [burn] until today equal to same rate as last quarter. […] They burned $5.8m in Q2. So that is $1.93m per month. Four full months since then and one half month so estimated cash burn of $8.7m. Even assuming no extra shutdown expenses that would leave them with $1.3m to distribute to shareholder

Nov 16, 2:37 PM MichaelGoode KBIO With 4.12m shares outstanding that equates to a liquidation value per share of $0.32 per share

Nov 16, 2:39 PM MichaelGoode KBIO caveats — this assumes no costs after today, no fees to the liquidator and no severance fees to employees. However, this also assumes the same compensation expense each month up until now and the company has laid off workers prior to today

Nov 16, 2:43 PM MichaelGoode KBIO and another caveat (this is negative for the stock) – the PR Friday mentions “As a part of its wind down and handing over management of the wind down to The Brenner Group, the company expects to phase out the remaining employees over the next thirty to sixty days.” — so there will be significant compensation expense over the next two months (no clue how large).

I looked up the company’s restructuring / termination expenses and at least for the first series of layoffs:

The Company expects to substantially complete the restructuring efforts in, and related charges will be incurred through, the fourth quarter of 2015. The Company estimates that it will incur total restructuring charges consisting of cash expenses for one-time termination benefits of between $400,000 and $500,000.

The above is from the November 9th 8-K filing. It would be reasonable to estimate another $300,000 in one-time payments to the remainder of the workforce.

I welcome feedback on my analysis. The relevant news can be found here:

Kalobios to wind down operations (November 13)
KaloBios to Reduce Workforce, Explore Strategic Alternatives (November 5)
10-Q for quarter ended June 30th


Disclaimer: I am short KBIO and I intend to trade this stock frequently after this is posted. I have a close business relationship with Tim Sykes (see Terms of Use for details). I have no relationship with any other parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.






Excel Macro to run trade report on DAS Trader Pro trade log

I have been mucking about with some programming lately and I only just realized that the work I had been doing to get my average price on trades so I can enter it into my trade log was easily automated. The below Excel (2010 is the version I use) macro has made my life a little easier so I am sharing it here. This can be used with the ‘trade’ output of DAS Trader Pro (which I am currently using with Centerpoint Securities) but with slight changes could be used on the output from Sterling Trader Pro or other trading platforms. There are easier ways to get the summaries, but I make sure to record trades I make in my trade log with details including my trade plan and post-trade evaluation — most of the time I’ll put together all the trades in each ticker to save time and because I’m trading the stock with one strategy. So for my purposes I like having the average price (including fees) shown neatly.

First, start with how the data should be formatted prior to the macro working. Go to “Trade” in DAS Trader Pro and then click “Trades”. Select the columns and copy and paste into an Excel worksheet named “scratchpad” (and make sure to paste into column B). Then hit Control + A to select the entire range of data and run the macro (I have it hotkeyed on my computer to Control+P). This will create a new worksheet, run a pivot table, copy the pivot table data, delete the pivot table worksheet, and paste the pivot table data and price per share in an easy to read format in another new worksheet.

Here is how the data should be formatted in your trade report that you paste into Excel (you do not need a header row):


And below is how the data will be output:


Obviously, you can use this same basic code framework to get lots of other data easily (such as ECN fees, etc). The one thing this code will not do is account for per-trade fees. I don’t have them at Centerpoint (clearing through ETC) so I didn’t program them. Also, make sure you enter your per-share commission into the code. Use this code at your own risk — I provide it without warranty or support.

Warning: if you are a programmer you will find my code ugly. You have been warned.

Below is the code:

Sub DAStraderAvgPrices()

‘ DAStraderAvgPrices Macro
‘ For this to work you need to copy pasta the following columns from DAS into the ‘sheet ‘scratchpad’
‘Time | Ticker | Buy/Sell | Price | Shares | Route | ECN Fees | Amount of trade
‘Those columns all must be there in that order or it will mess lots of things up.
‘The trades must be pasted into column B and then select all the trade info ‘(control+A)

Dim myRange As Range
Dim i As Long
Dim HeaderRange As Range
Dim HeaderPasteRange As Range
Dim TopLeft As Range
Dim objTable As PivotTable
Dim objField As PivotField
Dim rng As Range
Dim ws1 As Worksheet
Dim pt As PivotTable
Dim rngPT As Range
Dim rngPTa As Range
Dim rngCopy As Range
Dim rngCopy2 As Range
Dim lRowTop As Long
Dim lRowsPT As Long
Dim lRowPage As Long
Dim PivotTableSheet As String
Dim celltxt As String

‘this is my commission rate
commission = 0.0035

Set myRange = Selection

‘sort by column C then D (ticker then buy/sell)
myRange.Sort Key1:=Columns(3), Order1:=xlAscending, Key2:=Columns(4) _
, Order2:=xlAscending, Header:=xlGuess, OrderCustom:=1, MatchCase:= _
False, Orientation:=xlTopToBottom
‘the above works! Yay!

‘this section calculates the cost basis (including ECN fees and commissions) of each fill
For i = myRange.Rows.Count To 1 Step -1
Set BuySell = myRange.Cells(i, 3)
If BuySell.Value = “B” Then
myRange.Cells(i, 8) = (myRange.Cells(i, 4) + commission) * myRange.Cells(i, 5) + myRange.Cells(i, 7)
ElseIf BuySell.Value = “S” Then
myRange.Cells(i, 8) = (myRange.Cells(i, 4) – commission) * myRange.Cells(i, 5) – myRange.Cells(i, 7)
ElseIf BuySell.Value = “SS” Then
myRange.Cells(i, 8) = (myRange.Cells(i, 4) – commission) * myRange.Cells(i, 5) – myRange.Cells(i, 7)
End If
Next i

‘Here we append the header row to the data
myRange.Cells(0, 1) = “Time”
myRange.Cells(0, 2) = “Ticker”
myRange.Cells(0, 3) = “Buy/Sell”
myRange.Cells(0, 4) = “Price”
myRange.Cells(0, 5) = “Shares”
myRange.Cells(0, 6) = “Route”
myRange.Cells(0, 7) = “ECN Fee”
myRange.Cells(0, 8) = “Amount”

‘Pivot table time!

‘only uncomment the following two lines when testing on specific region

myRange.Cells(0, 1).Select

Set objTable = ActiveSheet.PivotTableWizard

Set objField = objTable.PivotFields(“Ticker”)
objField.Orientation = xlRowField
objField.Position = 1

Set objField = objTable.PivotFields(“Buy/Sell”)
objField.Orientation = xlRowField
objField.Position = 2

Set objField = objTable.PivotFields(“Shares”)
objField.Orientation = xlDataField
objField.Position = 1
objField.Function = xlSum
objField.NumberFormat = “##,###”

Set objField = objTable.PivotFields(“Amount”)
objField.Orientation = xlDataField
objField.Position = 2
objField.Function = xlSum
objField.NumberFormat = “##,###.##”

‘Pivot tables with multiple data fields have hidden field “data” —
‘adding the below line makes it display correctly
objTable.AddFields Array(“Ticker”, “Buy/Sell”), “Data”

‘Copy the Pivot table and paste it into a new worksheet as values
On Error Resume Next
Set pt = ActiveCell.PivotTable
Set rngPTa = pt.PageRange
‘On Error GoTo errHandler

PivotTableSheet = ActiveSheet.Name

‘If pt Is Nothing Then
‘ MsgBox “Could not copy pivot table for active cell”
‘ GoTo exitHandler
Set rngPT = pt.TableRange1
lRowTop = rngPT.Rows(1).row
lRowsPT = rngPT.Rows.Count
Set ws1 = Worksheets.Add
Set rngCopy = rngPT.Resize(lRowsPT – 1)
Set rngCopy2 = rngPT.Rows(lRowsPT)

rngCopy.Copy Destination:=ws1.Cells(lRowTop, 1)
rngCopy2.Copy Destination:=ws1.Cells(lRowTop + lRowsPT – 1, 1)
‘End If

If Not rngPTa Is Nothing Then
lRowPage = rngPTa.Rows(1).row
rngPTa.Copy Destination:=ws1.Cells(lRowPage, 1)
End If


‘Stopping Application Alerts
Application.DisplayAlerts = False

‘delete pivot table sheet

‘Add in some formatting and get price per share for buys/sells

Columns(“C:C”).ColumnWidth = 13.71
Columns(“D:D”).ColumnWidth = 14.86
ActiveCell.FormulaR1C1 = “Price”
Selection.NumberFormat = “0.0000”
Selection.ColumnWidth = 11.43
ActiveCell.FormulaR1C1 = “=IF(ISBLANK(RC[-4]),””””,RC[-4])”
Selection.AutoFill Destination:=Range(“F3:F197”), Type:=xlFillDefault
ActiveCell.FormulaR1C1 = _
Selection.AutoFill Destination:=Range(“G3:G202”), Type:=xlFillDefault

‘Loop through table to clear all rows that contain “Total”
Last = Cells(Rows.Count, “D”).End(xlUp).row
For i = Last To 1 Step -1
celltxt = Cells(i, “A”).Text
If InStr(1, celltxt, “Total”) Then
End If
Next i


Exit Sub
MsgBox “Could not copy pivot table for active cell”
Resume exitHandler
End Sub


Disclaimer: I have no position in any stocks mentioned as of this post being published but I may trade them in the future. I am a client of Centerpoint Securities (clearing through ETC). I have no relationship with any other parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

ElitePennyStock Paints target on its back: Best stock promoter out there

Disclosure: I’m short ElitePennyStock’s current promotion, AREN. See details at bottom.

In a world in which ever more promoters and manipulators have not just been sued by the SEC but sent to prison by US Department of Justice it is a dangerous thing to be known as the best stock promoter. But with having spectacularly failed in their most recent pump (of Coastal Integrated Services, COLV), ElitePennyStock is now in my opinion the best promoter out there. As detailed in a blog post by Tim Grittani (use code NEXT100 to save on his DVD), ElitePennyStock (and I use this name to refer to the people that run all the related websites) has ties to AwesomePennyStocks. See also the Promotion Stock Secrets research report on ElitePennyStock.

The two most recent ElitePennyStock pumps were American Leisure Holdings (AMLH) in January and February, and Media Analytics (MEDA) in December 2014 and January 2015. The AMLH pump lasted for 19 days prior to the big drop in price (note that the promotion continued through February 17. The MEDA pump lasted for 10 days prior to the precipitous drop (the last pump emails I received for MEDA came on December 19th).



So far the AREN (America Resources Exploration Inc) promotion is on day 17. I believe it very likely that the end of this pump is quite near. See the Promotion Stock Secrets report on AREN if you care to learn the details on the insiders in the company and how it was set up to be a promotion.


Interestingly, AREN filed a form 12b-25 with the SEC just before the market close today, indicating that they will not be able to file their quarterly report on time. I wonder if that may be another indication that the pump will soon be over.


Compensation: [different in emails from the different websites]
Promoter:  ElitePennyStock
Paying party: Intraday Holdings Ltd
Shares outstanding: 129,400,000
Previous closing price: $0.861
Market capitalization: $111 million


A Few miscellaneous notes

Penny stock gadfly and one-time stock promoter George Sharp threatened AREN with a lawsuit but never followed through.


I cannot vouch for their reporting skill / reliability, but The OTC Today reported that FINRA had asked clearing firms Alpine and ETC to voluntarily restrict the sales of large blocks of AREN stock.

One of the ElitePennyStock websites has a nice little video promoting AREN here. ElitePennyStock is following the lead of StockTips by inventing a fake person to be the promoter, in this case, Keith Richie.


Disclaimer: I am currently short 5200 shares of AREN. I may cover those shares or short more in the days following the publication of this post. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.