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Msg  8695 of 8816  at  8/25/2022 1:49:30 PM  by

GreatSwami


FWIW - saw this short list link and thought it useful.

ReconAfrica Short Interest Update – 9th Consecutive Increase, 6th Consecutive All-Time High

r/ReconAfrica - ReconAfrica Short Interest Update – 9th Consecutive Increase, 6th Consecutive All-Time High

Short Interest Data Table

Note: If you are interested in investing in ReconAfrica, see the section at the bottom of this post titled "Resources for New Investors."

Total short interest reached a new all-time high for the first reporting period of August 2022. This is the sixth consecutive all-time high and the ninth consecutive increase in short interest since there was net covering (a reduction in short interest) last recorded on 3/31/22. This is four and a half months of straight increases. Since 3/31/22, short interest has increased a whopping 81.6% Furthermore, the total days to cover, which is simply the short interest divided by the average daily trading volume, also reached a second consecutive all-time high at 9.9 days.

SHORT SELLERS FACE SIGNIFICANT RISKS IN THE WEEKS & MONTHS AHEAD

Given the size of their short position, there are several high-impact events that could quickly result in share price increases that could put the short sellers in a precarious position. These include the following:

1 – The 8-2 Makandina (P33) well, which is being drilled based on seismically defined traps, was spud on 6/25/22 with an estimated completion date of 45-60 days. Results from this well could be made available any day now.

2 – In his recent presentation at Enercom in Denver, Scot Evans announced that the JV data room will be opened in Q3 2022 (within 37 days of this post). With three more wells, a sidetrack of 6-2, and another round of seismic scheduled for the fall, many in the investor community view this as bullish. The reason for this is that logic dictates that ReconAfrica would not open the data room if they didn’t have anything to show to potential JV partners. By the time the data room is open, ReconAfrica should have the results of 8-2 in addition to the fully interpreted second round of 2D seismic, and they have certainly seen preliminary results that have not been shared with the public at this point in time.


r/ReconAfrica - ReconAfrica Short Interest Update – 9th Consecutive Increase, 6th Consecutive All-Time High

3 – Recent attempts to derail ReconAfrica have failed. A challenge to the permitting process was ruled in ReconAfrica’s favor by the high court on 7/29/22. ReconAfrica has also received a three-year extension to its Environmental Clearance Certificate (the “ECC”), from the Office of the Environmental Commissioner, Ministry of Environment, Forestry and Tourism of the Republic of Namibia on 8/17/22. ReconAfrica now faces no foreseeable obstacles to future exploration, and satellite imagery confirms that preparations are continuing at a breakneck pace on the upcoming 3-1 and 2-7/5-1 well sites (see my previous posts on satellite images).

4 – Short sellers face additional risks if any of the aforementioned events triggers interest from commercial or institutional investors. Currently, retail investors hold the majority of shares, but this could change at any time.

LONG-TERM INVESTORS HAVE SIGNIFICANT PROTECTION AGAINST ADVERSE EVENTS

Negative results from the 8-2 well would certainly have a negative effect on the share price, but there are several factors that provide a cushion to long-term investors. These include the following:

1 – The results from the 8-2 well are not binary. ReconAfrica holds leases in Namibia and Botswana that encompass 8.5 million acres. Following 8-2, ReconAfrica intends to drill three more wells, run a sidetrack on the original 6-2 well, and obtain a third round of seismic acquisition. With significant cash on hand, ReconAfrica is fully-funded for these projects. Furthermore, the Netherland Sewell report issued earlier this year states that “prospective resources” (P50, 18% recovery) are estimated to be 1 billion barrels of oil and 1.4 TcF of natural gas, and this was based on two test wells and the first round of seismic. Regardless of the results, this is a very large basin with significant potential. An adverse result on 8-2 will not cause the share price to drop to zero.

2 – Short sellers still need to cover to make a profit. With 5,523,609 shares shorted, short sellers will find it difficult to repurchase shares to cover their sizable short position without driving the share price higher. Even with negative results from 8-2, they may not be able to cover, with the desired profitably, by the time the next well reaches total depth.

PERSONAL COMMENTARY

At this point, I do not understand what the short sellers are thinking. Selling short is like selling uncovered call options. It has limited upside potential and unlimited downside potential. At the current share price, short sellers hit the point of diminishing marginal returns a long time ago, but they inexplicably continue to borrow and sell. While they have proven that they can cause a decrease in the share price, they have done so at a great cost to themselves (interest expense, risk, etc.). Even if their dreams come true and the stock price falls to zero, the amount they will make is not nearly enough to offset the enormous risk they are taking. As a long-term investor, I believe that they are laying the groundwork for an incredible rebound in the event of positive results.

The stacked area graph below charts the change in short interest since it hit a low point of 94,930 shares as reported on 3/31/21. Since then, short interest now stands at 5,523,609, a staggering 5,719% increase.


r/ReconAfrica - ReconAfrica Short Interest Update – 9th Consecutive Increase, 6th Consecutive All-Time High

ReconAfrica Short Interest 3/31/21 - 8/12/22

It is impossible to tell how much short sellers have made manipulating the share price of ReconAfrica. They could be making profit from intra-day gains on a regular basis. But we do know the number of shares shorted and the share price as of 8/12/22. From a short seller’s perspective, the following provides an example of the scenarios that could play out for them. These are the marginal, or additional, gains and losses they could see going forward from this point in time.


r/ReconAfrica - ReconAfrica Short Interest Update – 9th Consecutive Increase, 6th Consecutive All-Time High

Scenarios for short sellers at various share prices.

Some might think that the $100 price scenario is too high, but it is certainly possible given the size of the lease area. At that price, ReconAfrica would have a market capitalization of $18.7 billion in US dollars and $24.4 billion in Canadian dollars. In fact, it is entirely possible that the share price could go much higher if the Kavango Basin turns out to be a prolific oil field like the Permian Basin in North America. Note: This is already impossible.

Short sellers may be sitting on some impressive unrealized capital gains at this point, but they won't make any money until they cover (repurchase and return the borrowed shares). This could prove to be extremely difficult under any scenario, as covering would result in share price increases. It almost makes me wonder if the short sellers have gone so far down this rabbit hole that they got themselves stuck in a bad place, with limited upside potential and massive downside potential. The same thing applies to long-term investors with regard to unrealized gains and losses. If you are sitting on an unrealized loss, you will not lose money until you sell. That is the game the shorts are trying to play. Don't fall into the trap. In my opinion, the short sellers are facing a very grim future.

WHAT IS SHORT INTEREST AND HOW IS IT REPORTED?

Short interest is simply the number of open short positions on a security. This data is collected bi-monthly on the 15th (or last trading day before the 15th if it falls on a weekend or holiday) and the last trading day of the month. In the US, reporting must be submitted to FINRA (Financial Industry Regulatory Agency, which operates under the US Securities and Exchange Commission) while in Canada these statistics are collected by the IIROC (Investment Industry Regulatory Organization of Canada).

For example, the following link provides the 2022 schedule for FINRA:

https://www.finra.org/filing-reporting/regulatory-filing-systems/short-interest

PONZI SCHEME? PYRAMID SCHEME? EITHER WAY, SHORT SELLERS PAY INTEREST

If there is one thing proven by these statistics, it’s that short sellers have the ability to drive the share price down, but they need to keep borrowing more and selling more, essentially digging themselves deeper into a hole. Their hope is that they will be able to buy back (cover) and return the borrowed shares at a lower price. The recent string of all-time high short interest, which is much higher than when Fraser Perring of Viceroy Research were shorting ReconAfrica in the summer of 2021, clearly demonstrates the depth of this hole.

To make matters worse, it can be very expensive to short some stocks, and ReconAfrica has become increasingly expensive to short. To borrow shares, short sellers need to pay a “short borrow fee rate,” which is the interest rate they pay to borrow shares. Recently, this rate has exceeded 16%. You can find the latest short borrow fee rates for RECAF (US OTC exchange) and RECO (Canada TSXV exchange) here:

https://iborrowdesk.com/report/RECAF

https://iborrowdesk.com/report/RECO.CA

SHORT INTEREST PERCENTAGE OF FLOAT VS. DAYS TO COVER

Short sellers are quick to remind everyone on social media sites that the short interest in ReconAfrica is relatively low when compared to the total outstanding shares, and this is true. What they fail to acknowledge is that “Days to Cover” is a much more important statistic, and the recent increase indicates that, with average volume, it will take 9.9 days to cover the 5,523,609 shorted shares that were reported on 8/12/2022. And while the days to cover is simply a guide, it can be a bit misleading. Since it is calculated by dividing the short interest by the average daily volume, the denominator of this equation is skewed due to the level of short selling. This stock is held by several dedicated long-term investors, and the volume on a “normal” day of trading, which would exclude days with a news release or heavy shorting, is typically less than a half a percent of total float (outstanding shares).

To see the difference in trading volume, review the following chart which shows the top 10 lowest and highest trading volume days of 2022 as of 8/12/2022:


r/ReconAfrica - ReconAfrica Short Interest Update – 9th Consecutive Increase, 6th Consecutive All-Time High

Trading Volume Ranking

SHORTING THE GOOD NEWS TO MAKE IT LOOK LIKE BAD NEWS

The most interesting short attacks occur with good news. These attacks use the “short the good news to make it look like bad news” strategy that is often accompanied by FUD (Fear, Uncertainty, and Doubt) being promulgated on multiple social media platforms. In some cases, short sellers go so far as saying, “Of course this report is bad news. Everyone who understands geology and oil & gas exploration knows that it is bad news. Why else would the share price be dropping?” The reality is much different, and while the experts agree that it is good news, the decrease in the share price on these days is simply due to a massive amount of short selling.

The most striking example of this occurred after the 5/12/22 press release that included Netherland Sewell reserve estimates. These estimates were impressive and there is no way that they could be interpreted as “bad news.” In fact, they were actually available in a 4/22/22 SEDAR filing. NOTE: The NSAI report was anything but impressive? It was a mealy mouthed exercise in being deliberately vague. After the SEDAR filing, the price (RECAF US OTC) eventually increased to $5.40 on 4/29/22. In the two days that followed the press release, short sellers had driven the price down to $3.77, a 30% decrease. The extent of the shorting was reflected in the 5/13/22 FINRA and IIROC reports (see table above) and resulted in an increase of 375,462 to short interest.


r/ReconAfrica - ReconAfrica Short Interest Update – 9th Consecutive Increase, 6th Consecutive All-Time High

The links to these announcements and reports can be found below:

Notification of SEDAR Filing 4/28/22

Netherland Sewall Estimate of Prospective Resources

ReconAfrica Resource Report Press Release 5/12/22

CONCLUSIONS

Short sellers have definitely made a very large bet on unsuccessful results of the 8-2 well which is nearing completion. This well was drilled into seismically defined traps in an area defined by Netherland Sewell as having the greatest amount of oil-in-place in their report. (Inferred as "possible" but not "probable.") The next short interest report will be based on short interest as of 8/31/22. Will the short sellers cover, or will they continue to dig themselves deeper into a hole with this high-interest pyramid scheme? One way or another, we will find out in about two weeks when these statistics are reported to the public.

RESOURCES FOR NEW INVESTORS

ReconAfrica's Investor (Corporate) Presentation for Q3 2022 can be found here:

https://img1.wsimg.com/blobby/go/d53afaf0-187c-44a8-8c07-0d41fde346bb/downloads/ReconAfrica-Investor-Presentation - Q3 2022.pdf?ver=1660522128569

Recon Africa trades on the following exchanges under these ticker symbols:

Canada TSXV: RECO

US OTC: RECAF

Frankfurt: 0XD

You can also check my other Reddit posts for additional information.

ANALYST COVERAGE

Haywood Securities

https://img1.wsimg.com/blobby/go/d53afaf0-187c-44a8-8c07-0d41fde346bb/downloads/Haywood-Report-July-07-2022.pdf?ver=1657222613106

Canaccord Genuity Capital Markets

https://img1.wsimg.com/blobby/go/d53afaf0-187c-44a8-8c07-0d41fde346bb/downloads/Canaccord Genuity - 30 June 2022.pdf?ver=1656616250701

OTHER LINKS

Netherland, Sewell & Associates Third Party Resource Report

https://reconafrica.com/wp-content/uploads/ReconAfrica-Press-Release-0451222.pdf

ReconAfrica wins judgment court ruling over environmental permits

https://reconafrica.com/wp-content/uploads/ReconAfrica-Press-Release-071922.pdf

ReconAfrica Announces Extension of Environmental Clearance Certificate to August 26, 2025

https://reconafrica.com/wp-content/uploads/ReconAfrica-Press-Release-081722.pdf

ReconAfrica Discord Channel on YouTube

https://www.youtube.com/channel/UC41hB4vBgSAcKKqbei1caJA/videos

TotalEnergies & Shell in offshore Namibia:

Energy Voice - TotalEnergies makes significant splash at Venus - https://12ft.io/proxy?q=https://www.energyvoice.com/oilandgas/africa/ep-africa/390150/namibia-totalenergies-venus-discovery/

Energy Voice - Namibia eyes Shell, TotalEnergies production in 2028 - https://12ft.io/proxy?q=https://www.energyvoice.com/oilandgas/africa/ep-africa/404450/namibia-2028-namcor-mulunga/

Energy Voice - Namibia’s next great hopes, beyond Venus and Graff - https://12ft.io/proxy?q=https://www.energyvoice.com/oilandgas/africa/ep-africa/404399/namibia-exploration-basins-discoveries/

ExxonMobil in offshore Namibia:

https://corporate.exxonmobil.com/Locations/Namibia

Tom Alweendo, Minister of Mines and Energy - Alweendo warns against Western propaganda on oil

https://informante.web.na/?p=322480








$XOM $SHEL $TTE $CGXEF $FECCF $OYL $AOIFF $APA $FANG $MTDR $EOG $DVN $OXY $GME $AMC $BBBY $PXD $SU $TUWOY $VNOM $CHK $FHELF $HES $INCTF $MEL $PSX $TTLHF $EEENF $RECAF $RECO $0XD

 


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8696 Re: FWIW - saw this short list link and thought it useful. The Red 0 8/25/2022 5:00:05 PM




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